NCGA Official Defends Biofuels
Tolman says ethanol is being unfairly blamed.
Ann Toner
Published: May 12, 2008
How quickly the tide of public opinion can turn.
According to Rick Tolman, chief executive officer of the National Corn Growers Association, oil companies and misinformed media and consumer spokesmen are behind the campaign to vilify biofuels manufacturing.
Biofuels have gone from being one of the country's answers to the rising price of imported oil, to being blamed food price inflation at home and abroad. Big city editorial cartoons depict Third World children starving because fat cat Americans are using "their" food to make ethanol.
Tolman used a Lincoln visit to try to refute those inaccuracies to grassroots media who maybe understand enough about farming and the grain business to understand what he had to say. "It's not food OR fuel, it's food AND fuel," he said.
The price of corn, soybeans and wheat have gone up in the last year, but the run-up in prices isn't strictly due to the needs of ethanol plants fighting for grain to keep the plant running. The lively market has drawn a large surge of speculators hoping to make some quick bucks on a run-up in prices, he said. Similar events are happening in the oil futures market.
Also, the dollar is lower than it has been in years in comparison to many foreign currencies. Some other grain exporting countries had less grain to sell.
a result, record amounts of U.S. grain are being exported for use abroad. Many of the buyers haven't been U.S. customers in years. That's hardly yanking an ear of corn away from a starving African to feed ethanol to some American's SUV.
Retail grocery prices went up 4.5% in the last year, a little more than the 2-3% consumers have seen in recent years, but hardly time to panic, said Tolman. Higher grain prices are a factor in livestock-related items such as eggs, milk and meat.
Most other food items don't contain enough grain for a doubling of commodity prices to make more than a few cents' difference in the cost of producing it. For instance, a 12-oz. box of corn flakes contains about 8 cents worth of corn. But high grain prices are a handy scapegoat for increased costs for processing, transportation, packaging and labor.
Last year, according to Tolman, American farmers grew about 13.1 billion bushels of corn, to go along with 1.3 billion bushels of carryover. Usage of that 14.4 billion bushels is as follows: Feed, 43%; ethanol; 22%; export; 17.4%; other domestic use, including human consumption 9.4%; and surplus, 9%.
Some of the leaders of the anti-ethanol charge want Congress to roll back its biofuels standards and reduce incentives for ethanol production. That sends the wrong message to the biofuels industry and the lenders to which it looks for financing, Tolman added.
And despite the much higher prices, petroleum companies aren't building or enhancing their antiquated U.S. refinery capacity, nor are they tapping any new domestic oil reserves. Any reduction in biofuels incentive is a moved toward greater dependency on costly foreign oil in the future.
"The oil industry has poured a lot of money into shifting the blame to ethanol and away from them," said Tolman. "With record profits, they've got plenty of cash to spare. Since 1993, oil has gone from $10 for a barrel of crude to over $120 per barrel. In the same time, corn has gone from $2 per bushel to $5 per bushel."
Tolman said that USDA's Economic Research Service, the Federal Reserve Bank of Kansas City, and Texas A & M have all come out with reports in recent weeks saying that ethanol production has very little to do with any increase in food prices. But the soaring cost of energy and the value of the dollar are factors in retail price increases.
In Tolman's view, reducing commodity exports, as some presidents did in the 1970s and early 1980s when domestic prices heated up, also is a bad idea. It's taken the U.S. grain industry nearly 30 years to win back some of the export customers it lost then. Rather, the United States needs to weather the current situation without making any grain policy changes.
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Tagged: usda, wheat, soybeans, ethanol, biofuels
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