Ethanol. Right. Now.

USDA asked to correct reporting which overstates corn used for ethanol

The Governors' Biofuels Coalition (GBC) wrote yesterday to Agriculture Secretary Tom Vilsack asking the agency to immediately correct its reporting procedures that overstate the amount of corn used for ethanol in the U.S.

"In recent months, global weather disruptions, rising oil prices, commodity speculation, and rising incomes that drive increased demand for grains and meat proteins have combined to once again put upward price pressure on corn and other commodities.  Predictably, first-generation ethanol opponents have begun to resurrect the food vs. fuel attacks... despite the fact that numerous studies by global food organizations, the Congressional Budget Office, and other reputable experts confirmed that ethanol was not a significant factor," the letter states.

"Unfortunately, USDA's monthly corn supply and demand reports provide support for this sensationalized reporting because they identify 'corn demand for ethanol' without immediately noting this is gross demand, and not the net use of the starch portion of the corn kernel," the letter continues.  "This overstates the use of corn for ethanol by as much as a factor of two or more, and fails to inform the public about what is truly happening in the food and fuel supply chain."

USDA reporting does not take into account the fact that to produce ethanol, only the starch portion of the corn kernel is used, and all the nutritional value of the corn -- the fat, fiber, and protein -- are returned to the food supply in the form of distillers grain, a high-quality livestock feed. 

The current USDA reporting system does not count the 33% of the corn that comes back to the nation's supply, giving the impression to the public that ethanol uses much more corn than it actually does.  A continuing error of one-third should not be acceptable.  I fully agree with the Governors' Biofuels Coalition that the USDA's reporting needs to be corrected as soon as possible so the public and the media can have a more accurate picture of the real amount of corn used for ethanol, as well as ethanol plants' contribution of a valuable food product for the nation's livestock -- food for those that feed us.  Food and fuel, not food versus fuel.

Read the GBC's full letter here, or view a special edition of Ethanol Today magazine dedicated to "food and fuel."

Posted by: Kristin Brekke, Communications Director for the American Coalition for Ethanol

Big Food's (very profitable) blame game

With oil prices currently around $95 a barrel, the cost of crude oil is about $2.25 a gallon. After it is refined, shipped, loaded, and delivered to a station, we pay $2.50 to $2.75 (plus around 50 cents in federal, state, and other taxes) for a gallon of their finished product.

Similarly, with corn at around six bucks a bushel, ethanol plants take about $2.25 in corn and, after it is refined, shipped, loaded, taxed and delivered to a station, it is also sold for around the same $2.50 a gallon.

Meanwhile, Big Food companies take the same $2.25 worth of corn and make it into 100 bucks worth of cornflakes, or several hundred dollars worth of candy or soft drinks. Then they have a little extra money so they can hire PR folks to blame ethanol and oil as the reason for high food prices.

In 2008 when the Grocery Manufacturers Association hired Glover Park to smear ethanol and blame the corn used (less than 3 percent of the world’s grain) in ethanol production, Big Food lamented the increased price of corn, said prices would go higher, and then raised their prices to prove they were right. The result? Record food company profits.

If I have ever said that Big Food is almost as bad as Big Oil, I take it back. They’re every bit as bad. Maybe worse.

It doesn’t take a lot of knowledge about markets and economics to understand that when government farm payments are at their highest, while those payments help farmers manage market volatility, they are also keeping Big Food companies’ costs artificially low. It is easy to see why Big Food would rather go back to the days when they paid two bucks for corn and you and I paid the rest of the bill with tax dollars.

What is hard to understand is how all of these ethanol detractors think that paying less for corn will encourage farmers to grow more of it. Ethanol production is causing more corn to be grown – more food is available because ethanol has created real markets for corn. As a bonus, ethanol adds to the fuel supply and helps moderate oil prices.

When oil prices go up, people carpool, take public transportation, ride a bike, walk, or stay home. When food prices go up, people don’t have options like that. If Big Food – with its shiny new mega-stores, elaborate packaging, and ultra-high prices on actual healthy food – is truly concerned about people being able to afford to eat, the solution is simple:

Quit charging so much.

Posted by: Ron Lamberty, Vice President / Market Development, American Coalition for Ethanol

Tim Searchinger "food vs. fuel" claims countered

Tim Searchinger, Princeton University visiting lecturer and contributor to “indirect land use change” charges against corn-based ethanol, is back in the news, this time writing a guest editorial in the February 11th Washington Post on biofuels’ role in food prices.  Marc Rauch, executive vice president at The Auto Channel, sent this response to Mr. Searchinger, which he also shared with us to publish here:


Hi Tim –

In reading your editorial in today's Washington Post (“How biofuels contribute to the food crisis”) I’m reminded of the famous movie line, “Just when I thought I caught up with the rat race the rats got faster.”
 
For a few years, whenever those opponents of ethanol launched a new attack on widespread acceptance or expansion of ethanol, we would hear about how the use of corn was affecting the overall price of food and causing worldwide starvation.
 
It took some time, but finally ethanol advocates started to prove that corn use for ethanol had no relationship to the rise in corn prices or general food prices, and that its use to make biofuels did not contribute to either a shortage or world hunger – primarily because the world outside of America doesn’t eat corn, they eat wheat. In this regard, the World Bank’s statement issued last summer reversed their earlier claim that ethanol was the reason for corn price rises and shortages.
 
Obviously, from your story, you know that the cost of the corn actually used in a box of corn flakes is a minuscule amount, roughly 1.5% of a $4 retail price.
 
So, to use the rat-rat race analogy, you came up with a new way to cast the same old worn-out story. Instead of corn flakes, which you agree that the world doesn’t eat like us Americans, you substitute corn meal for corn flakes. However, you really didn’t do your homework very well.
 
To begin with, corn meal is used for many other things than feeding starving people around the world. Corn meal is used as a plant fungicide, for weed prevention, insect repellant and to protect wooden floors. So why not blame the rise in corn meal prices on people who wish to use a non-chemical solution to their garden and pest problems? What, chemical fertilizers and insecticides are not good enough?
 
Why not be critical of people who like to dance on wooden floors? You mean it’s okay for a family in Somalia to starve just because some ballroom in New York doesn’t want to have to refinish their wood floor so often?
 
In addition, corn meal is used by seafood chefs as a simple, low-cost way to fatten clams and mussels before cooking them in any number of favorite recipes. Why not blame seafood lovers and restaurants for causing a run up of corn prices and shortages? I’ll bet that there are far more people who regularly eat clams and mussels than use ethanol.
 
Expanding on this chain of thought, let’s look at another significant use of corn: as a sweetener in soft drinks, candy and other snacks. Here we are, in the midst of what many people believe is a fast-food-obesity epidemic and you’re blaming ethanol for too much use of corn. Wouldn’t it be better for everyone concerned if you, a degreed fellow at a prestigious think tank, made the argument that we shouldn’t be eating so much junk food? It would be better for the health of non-starving humans, while leaving more “corn” for the starving humans.
 
Next, since even the worst scenarios merely depict a situation in which corn supplies will only be low until the next harvest, not exhausted, then there isn’t really any reason for corn prices to rise…except for one reason, and one reason only: commodity speculators. And, and as I know that even you must know, it was due to commodity speculators that there was the previous rise in corn prices that had been  errantly blamed on ethanol production.
 
However, most importantly, your blame on ethanol production for the real or imagined starvation of peoples around the world has absolutely nothing to do with corn ethanol production and use, but on the massive wheat failures in Russia and China. If either or both Russia and China had improved their farming methods, instead of screwing around with deviant forms of government for the past eight decades or so, they probably wouldn’t have had to face crop failures, again, creating a real (or imagined) food shortage. So why do we have to make up for their failures? Why are we responsible? Why should we have to sacrifice, once again, national aspirations for energy independence because of Russia and China’s farming failures? When and where have you written a paper that lays the blame for food price increases or shortages on them?
 
What truly amazes and concerns me is that there are people like you, who have wasted the educational resources of America to put forth the rubbish that you do. If your goal in life was simply to figure out how to suck up oil industry money couldn’t you have just opened a gasoline service station and been satisfied with providing clean restrooms for your customers? Why take up space in a classroom? Why tarnish the name of an institution like Princeton? Why write and publish a report that isn’t fit to wrap fish in?
 
If you got this far in the letter, thanks for your time. I hope that it has some impact on you.
 
Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL
www.theautochannel.com

Response to The WSJ: Ethanol is not reducing the amount of corn for food

While I was amused that The Wall Street Journal would invoke “morality” in one of its editorials, I was stunned by the sheer number of half-truths, miscalculations, and misleading statements that could be wedged into one 600 word anti-ethanol editorial, “Amber Waves of Ethanol.”

The article primarily seeks to blame ethanol for higher food prices, and even the failure of two food companies, yet it includes no discussion about the morality of other Big Food companies who managed to thrive during the time period the others failed, by invoking the mythical “food vs. fuel” bogeyman as an excuse to raise their prices and reap record profits.  While the “food vs. fuel” PR campaign was wildly successful, it was not the truth, and it still isn’t.

In fact, the opposite is true.  More corn for all other uses is now available in the United States because of growing ethanol production (see chart). 

Chart shows the U.S. corn crop in billions of bushels, the portion used to make ethanol, and the portion remaining for food, feed, and export.

Sources: Corn production data: U.S. Department of Agriculture / Ethanol production data: U.S. Department of Energy's Energy Information Service

The WSJ article talks of “reduced corn food supply,” which is at best ignorant of reality.  The supply of corn for food in America and around the world is increasing, and in the United States that is due in part to the fact that ethanol has restored market pricing to corn – as opposed to artificially low prices with government payments designed to keep farmers growing cheap corn.  Because real grain markets are more attractive, farmers are growing more corn – more food – than ever before.  I am continually puzzled by those who think farmers will grow more corn if they are paid less for it.  Which economics textbook did I miss that contained that theory?

The article contained many other factual errors, such as ignoring consistently higher corn yields and record-setting corn production, no recognition that ethanol only uses starch and returns all of corn’s protein, fat and fiber to the food supply in the form of the animal feed distillers grain (a 33 percent error), and no recognition of the fact that China – yes, China – is currently accusing U.S. ethanol producers of producing too much of this low-cost feed.  I am led to the conclusion that if this is the quality of analysis being used to make decisions on Wall Street, we had better be prepared to bail them out again.

Posted by: Ron Lamberty, Vice President / Market Development, American Coalition for Ethanol

Distillers grain debunks "food vs. fuel"

The second day of the ACE Ethanol Conference featured a panel discussion titled “Grain Changers: DDGS & the Truth Behind Food Prices.” 

Jay O’Neil, Senior Agricultural Economist for the International Grains Program at Kansas State University, outlined four variables that can affect the price of food: commodity prices, fuel prices, world economic growth, and speculation.  These variables, combined with weather-related problems in crop production, impact the price of food.  Ethanol, however, does not have a large role in food prices.

“Ethanol had very little to do with it,” O’Neil said, referencing the world-wide run-up in commodity prices in 2008.  The increase in world grain prices was due to a shortage in the wheat crop, in Australia, Europe, as well as the U.S. and Canada.  Other commodities followed, and the subsequent increase in food prices was wrongly blamed on corn used for ethanol.  The current drought in Russia affecting the wheat crop may bring another round of misguided “food or fuel” questioning if other commodity prices are affected.

O’Neil asked what we as Americans are more afraid of: corn prices increasing by 50 percent, or crude oil prices increasing 50 percent.

“Which of these scenarios would display the biggest threat to our economy?" he asked. "While ethanol gives America fuel independence and represents an investment in farm values, our dependence on crude oil negatively impacts our economy and our national security."

The second panelist was Bill Couser, owner of Couser Cattle Company of Nevada, Iowa.  He is current president of the Iowa Renewable Fuels Association and serves on the board of Lincolnway Energy, also of Nevada. 

At his family-owned cattle feedlot, Couser said he witnesses first-hand that “food versus fuel” is an absolute myth.  He delivers corn to the ethanol plant harvested on his farm, and then takes the co-product distillers grain home to incorporate into the feeding ration for his cattle.  Not everyone realizes that only the starch portion of the corn kernel is used to make ethanol, and all the nutrients from the corn – fat, fiber, protein etc. – is returned to the feed/food supply in the form of distillers grain.

“Instead of ‘food versus fuel’ I like to say it’s ‘food, fuel, feed, and fertilizer’,” Couser said.

Couser also reminded the attendees of the importance of story.  “Farmers, ethanol producers, and industry supporters alike need to tell their stories to lawmakers," he said.  "It's these stories, coming from your mouths, that bring credibility to ethanol's story."

More corn, more ethanol than ever before

This headline might sound like one that ethanol critics will appreciate, but it's not the whole story.  We're using more corn to make more ethanol than ever before -- yet food prices are down.  How's that for debunking the "food vs. fuel" myth?

The '09 corn harvest is now beginning, and America's farmers are once again showing why they're the best in the world.  The most recent USDA figures forecast the second-largest corn crop, an estimated 13 billion bushels.  The average corn yield is predicted at 164.2 bushels per acre, up a full 10 bushels per acre from last year. The number of acres expected to be harvest this year (79.3 million) is 1% larger than last year, but the total crop is expected to be 8% larger than last year -- proving how farmers are making every acre count.

Recent media reports are documenting decreasing prices at the grocery store. The American Farm Bureau's "Marketbasket Survey" for the July-September period, for example, showed retail food prices under a year ago for the fourth consecutive quarter and down 10% from one year ago. A healthy corn crop this fall will provide ample supplies of corn for all important uses -- food, feed, and fuel.

Thanks to America's farmers for all they do.

Valero cites productivity of American corn growers

Valero Energy Corporation has been in the ethanol-related news lately, the nation's largest refiner and now a producer of ethanol at 7 plants purchased from VeraSun Energy.  In an August 21st article in the Ft. Dodge, Iowa Messenger, Valero cited the productivity of U.S. corn growers as reason to forget the "food vs. fuel" debate.

"The American farmer continues to increase their productivity," said Bill Day, Director of Media Relations for Valero.  "The amount of production they're getting per acre is amazing."  These increased yields translate into plenty of corn for both fuel and food, Day told the newspaper. 

Read the article "Corn stats shift Valero stance: Energy giant reverses its food vs. fuel concerns."

The Houston Chronicle also covered Valero's ethanol story in an August 24th article, "Oil refining giant finds its raw material in cornfields."  Reporter Brett Clanton writes, "Valero's major entry into the renewable fuels business marks a break with a U.S. oil and gas industry that in recent years has rarely missed an opportunity to point out flaws with corn ethanol and government policies that support it."

Another interesting note: Valero CEO Bill Klesse has recently been elected Chairman of the National Petrochemical & Refiners Association (NPRA), a group that is one of ethanol's harshest critics.  How will Valero combine these roles as both ethanol producer and head of the NPRA?  Time will tell.  Stay tuned...

Senator Thune questions Vilsack on higher blends, land use change

http://www.youtube.com/watch?v=xlbbRtZ_GXQ

Follow this link to a video on YouTube showing U.S. Senator John Thune (R-SD) questioning incoming Secretary of Agriculture Tom Vilsack during a hearing of the Senate Agriculture Committee.  Senator Thune asks key questions relating to higher blends of ethanol, food prices, and land use change metrics.

USDA says there will be more corn than expected

The U.S. Department of Agriculture has raised by more than 20 percent (316 million bushels) the amount of corn they estimate will be on hand at the beginning of the fall harvest. USDA has also upped the total of the 2008 corn crop, increasing it 81 million bushels from the December estimate to 12.1 billion bushels -- the second largest corn crop on record.

A slowdown in ethanol production is lessening demand, and the larger number of estimated bushels is applying downward pressure on corn market prices.

There will be plenty of corn on hand for all uses -- feed, food, and fuel -- and perhaps food processors can begin passing along the savings to grocery shoppers.

Food manufacturers are making packages smaller

An interesting article in the Chicago Sun-Times recently confirms that many food manufacturers are making the packaging of their products smaller, offering consumers less for their money.

The article states: "Shoppers without a keen eye and a willingness to read the fine print on labels might have missed what has happened: Food manufacturers were downsizing packages, while keeping prices the same, as they passed on higher food costs to consumers."

Read the full article here:
http://www.suntimes.com/news/nation/1356955,w-food-packages-shrinking-general-mills123108.article

USDA notes '08 average corn prices is lower than in '07

In new supply and demand estimates released today, the USDA shows that the average price for a bushel of corn in 2008 is around $4 - lower than the average price in 2007. The National Corn Growers Associates points out that this proves that higher ethanol demand can be accommodated with little impact on corn and food prices.

NCGA's President, Bob Dickey, is a farmer from Laurel, Nebraska. In a press statement today he said, "Growers in 2008 overcame numerous obstacles to bring in a good crop and meet all needs for corn. One of our significant challenges has been dealing with higher costs for land, fuel, and fertilizer and trying to break even. The high prices for corn futures were unrelated to ethanol demand and did not always mean more money in the pockets of growers."

Posted by KB, 12/11/08

Corn prices are down, yet food prices are still up

As families prepare for their annual Thanksgiving dinner this week, they may want to look to food processing companies for answers as to why their grocery bills will be higher than last year.

"When corn was nearly $8 per bushel this summer, food manufacturers began an expensive and dishonest PR campaign to convince Americans that food prices were high due to the demand for corn-based ethanol.  Now that corn prices are below $4 per bushel, and we're grinding even more corn for ethanol than earlier this year, these same food companies are proving that good prices are high because they want them to be high," said Brian Jennings of the American Coalition for Ethanol.

Companies such as General Mills, Del Monte, and ConAgra have all reported a double-digit increase in sales during the last quarter, partly due to price increases. 

An Associated Press article (http://www.google.com/hostednews/ap/article/ALeqM5i7bcgQyokxAYSLttY7nF6jtG8_CAD94JDBN00) had an interesting statement by Chief Executive William R. Johnson: he said "commodity costs are coming down and Heinz will leave pricing in place, which will help boost margins. Heinz will invest in marketing and innovation to push its message of value to consumers, he said. The company is also looking at changing sizes of packages and providing new offerings to keep consumers wanting its products."

Posted by KB 11/24/08

Article: Growing evidence ethanol industry can produce food AND fuel

“There’s a growing consensus that ethanol is not responsible for driving up food costs, with new data to back it up,” said Joshua Morby, executive director of the Wisconsin Bio Industry Alliance. “In fact, many ethanol plants, like the one operated by Didion Ethanol, are producing both food and fuel from corn.”

Morby was in attendance at the “Balancing Energy, Food and Climate” conference today at UW-Madison. The conference featured presentations regarding the long-term sustainability of bio fuels as a fuel source, and offered more evidence that bio fuels like ethanol are not driving up the cost of food.

The article stated:  "In fact, rather than contributing to food shortages, ethanol plants are helping to provide food to needy areas."

The Didion Ethanol plant, located in Cambria, WI, is able convert a kernel of corn into both clean-burning ethanol and food products, the latter of which is sent to help feed starving people in Africa and Asia as part of the USAID Famine Relief Program.

“As myth after myth about ethanol is debunked, it’s time for bio fuels to play a larger role in meeting our nation’s energy needs,” Morby said. “Ethanol facilities like the Didion plant can both fuel our country and feed the world.

Check out the article here:
http://dailykenoshan.com/index.php?option=com_content&task=view&id=7111&Itemid=114

Posted by KB, 11/13/08

Senator Grassley asks Grocery Manufacturers to get honest about corn prices

U.S. Senator Chuck Grassley (R-IA) took it to the Grocery Manufacturers Association in a letter yesterday, asking them why they haven't passed along the savings to consumers now that corn prices have gone down.  Earlier this year GMA blamed ethanol and high corn prices as the reason they had to raise food prices, though today corn and other grain prices have fallen 50% from their spring highs.

"This indicates that while food processors were willing and able to immediately blame ethanol and rising corn prices for having to increase retail food prices, they won't be extending the same courtesy by lowering those prices with lower corn and oil prices," Grassley states in his Oct. 28 letter.

Now that grain and energy prices are down by half, "surely we can expect that the grocery manufacturers will pass on these savings to American consumers who are suffering from economic hardship," Grassley says.

Read his entire letter here: http://blog.foodpricetruth.org/wp-content/uploads/2008/10/grassley-letter-to-gma2.pdf

Reuters, Chicago Tribune report on high grocery prices despite low corn prices

The grocers (GMA) and Big Oil have financed a lot of unfriendly ethanol news headlines this year, so their PR war rooms must be working overtime to try and beat back this fair and balanced Reuters story that broke recently.

Sam Nelson, a Reuters writer, indicates in his article that "Heavy demand for corn from ethanol makers was seen as a key driver of corn futures to record highs in June, but since then the sharp decline of corn shows that belief was mistaken."

"Corn is down 50 percent from its high in June, even as the amount of grain used to produce renewable fuel in the U.S. remained the same."

So why aren't food prices lower now that corn prices have fallen from nearly $8 per bushel to $3.50?

According to a recent Chicago Tribune article, "Packaged goods-makers will do all they can to keep consumer prices high, even though their costs for wheat, corn, and other raw materials is falling."

So corn prices are down but food prices will remain high because GMA wants to profit at the expense of U.S. working families.

Link to Reuters article: http://www.guardian.co.uk/business/feedarticle/7914436

Posted by BJ, 10/27/08

Is Tesoro really concerned about pollution?

The California Air Resources Board (CARB) recently issued standards that will lead to refiners putting 10% ethanol in their gasoline, up from 5.7% in most of the state.  As a result, one of the nation’s largest oil companies – Tesoro – is suddenly so concerned about pollution and food costs that they’ve filed as lawsuit against CARB, saying they don’t know if  CARB gave enough consideration to how that change might impact air quality and food price.

 

Really, Tesoro? Really?  A representative of the oil industry – the industry that invented pollution – is now suddenly concerned that using less of their filthy fuel will cause more air quality problems?  The industry responsible for the overwhelming majority of food cost increases (and the overwhelming majority of all inflation, for that matter) is suddenly worried about how much people are spending at the grocery store? 

 

You’re kidding, Tesoro… right?  Someone in your San Antonio office there wrote this up as a joke, and it accidently got filed in the courthouse… right?  If this lawsuit were an actual suit, it wouldn’t have enough fabric to make a Speedo.

 

Tesoro spokespeople say they expect a ruling in 30 to 60 days.  It should take 30 to 60 seconds – unless CARB wants to evaluate how much impact Tesoro’s oil and gas and diesel fuel is having on air quality and food prices.  Then maybe they would rule that Tesoro is right, and that 10% ethanol isn’t the right number…  It isn’t nearly enough.

 

Posted by RL, 10/3/08