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On Ethanol: There They Go Again

On Ethanol: There They Go Again

One of the great lines of the 1980 presidential debate between President Jimmy Carter and Republican challenger Ronald Reagan was the Gipper’s “There you go again.” There’s a reason why this phrase has become a political staple. Sometimes it’s just so apt.

And that’s the way we feel about our ethanol opponents. They keep repeating the same complaints without any thought to whether they have been disproven. We and our allies in American agriculture and the ethanol industry have spilled a lot of digital ink trying to set the record straight.

While we’ve treated it numerous times, let’s talk for a minute, again, about the phony “food versus fuel” debate. There are two reasons why we needn’t be concerned about ethanol’s impact on the corn supply and food prices.

First, we are growing more corn on each acre, thanks to technology in the seed and practices on the farm. And we will do so for years to come.

In 2010, U.S. growers reached an average yield of 152.8 bu./acre. In 2000, it was 136.9 bu. and in 1990 the average yield was 118.5. Some seed companies and others think we can reach 300 bu./acre, which has already been surpassed numerous times over the past several years by participants in our National Corn Yield Contest. There remains a great amount of yield potential to be explored. Informa Economics estimates that long-run corn yields will continue to increase, reaching 189 bu./acre in 2020. Applying that to the acres expected to be harvested later this year means we could see a corn crop of more than 16 billion bushels in 2020.

Second, at the same time, while the ethanol market has been our “growth sector” for corn demand, its growth is slowing down because we are reaching the limit of how much ethanol can be utilized. More traditional uses, such as for feed and food, have not been rising as quickly as ethanol, and meeting these needs has also been a side benefit of ethanol production, which results in corn oil for a number of uses and various forms of distillers’ grains for livestock feed. In fact, the ProExporter Network estimates that distillers’ grains will provide the equivalent of 1.2 billion bushels of corn livestock feed this year.

Food vs. fuel

Simply put, the Renewable Fuels Association points out, U.S. ethanol production represents only 3% of the increasing global grain supply. As such, it can have little impact, if any, on global food prices.

But we can even take this whole argument a step further and call out the many organizations that have refuted and repudiated the “food vs. fuel” theory. We’ve done this before but it obviously needs to be re-stated and expanded. Some folks just haven’t a clue.

Shortly after the 2007-2008 spike in corn prices, the USDA has said that “Higher corn prices pass through in retail prices at a rate less than 10% of the corn price change.” The Congressional Budget Office said that ethanol accounted for only 0.5-0.8 percentage points of the 5.1% rise in food prices from 2007 to 2008 – meaning other factors such as energy costs represented up to 90% of the increase. The Federal Reserve said that non-farm costs continue to add the most to the retail food dollar – from 59% in 1959 to 80% today, due primarily to rising labor and energy costs. And research from Texas A&M said that higher corn prices have had very little effect on consumer food prices and that higher energy prices should be viewed as the underlying force driving economic change.

More recently, with corn and food prices trending in the news again, the research is the same.

The United Kingdom’s Department for Environment, Food and Rural Affairs issued a report in March 2010 that discounted biofuels impact, stating “Available evidence suggests that biofuels had a relatively small contribution to the 2008 spike in agricultural commodity prices. Studies which have found a large biofuel impact across agricultural commodities have often considered too few variables, relied on statistical associations or made unrealistic or inconsistent assumptions.”

In a July 2010 report, the World Bank stated that “the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors may have been partly responsible for the 2007-2008 spike.”

When such influential media outlets as the Wall Street Journal ignore these facts, they do a great disservice to American consumers – and to their own reputation.

At a time when there is civil unrest tied to higher food prices, experience tells us we need to look at all the causes and the closer we can get to the root issues the closer we will be to a real lasting solution. And there certainly are many causes to choose from, such as speculation in commodity markets, corrupt foreign regimes, currency fluctuation, hoarding by other countries and, of course, the weather, about which we can do precious little. We also need to wonder to what degree this turmoil is caused by food prices as opposed to say, a desire for democracy.

In the final analysis, attacking corn and ethanol are only a diversion for those who want a quick PR opportunity or have some lurking ulterior motive. Otherwise, it’s a waste of time for those who want to bring about a real, positive change. Let’s get to work doing what farmers are doing every day –feeding and fueling our families at home, and a growing global population.

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