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Opinion: The Biofuel Smear Campaign

The food vs. fuel discussion deserves thoughtful consideration, but the mainstream media has hijacked the debate.

These should be giddy days for America's corn farmers. In years past you were proud to supply the country and the world with food. And this year American farmers once again answered the call, having just harvested a record crop in both yield and acreage. The market asked for more corn and you provided it.

But instead of celebrating your accomplishments, it appears you should be ducking for cover. With food prices rising steadily this past year, the mainstream media has decided to blame biofuels — and apparently the people who grow the raw product for them — for rising food prices, even malnutrition in developing countries. 

Major articles appeared late last year in major news media. CNBC's Becky Quick proclaimed, "The ethanol production push has raised demand for corn and pushed up food prices across the country without contributing much relief for gas hungry drivers, so why do we continue converting food to energy?"

The United Nation's Jean Ziegler claimed biofuels are "a crime against humanity" and should be banned for five years. Dennis Avery, Director for the Center for Global Food Issues, apocalyptically proclaimed, "We're burning food," as he shilled for more nuclear plants on CBNC. My how the spin is humming these days!

Comments like these seem comparable to shouting fire in a crowded theatre. A documentary, "King Corn," tracks the crop from planting to consumption and concludes it is to blame for all sorts of ills, including obesity. After all, don't we put corn sweetener into sodas and fatten cattle that are turned into fast food hamburgers? Apparently there is no discussion of demand for those products and the fact that someone must actually want them and pay for them before consuming them.

Sizzle sells, even when the sizzle makes no sense.

Rising food prices

Rising food prices appear to be the main objection now in the food vs. fuel debate. So let's get some facts into the discussion. Despite what you hear, good healthy food is still cheaper here than anywhere else on the planet. Ethanol growth will have no impact on the availability of food in U.S. grocery stores. And we proved last year we were able to grow more food crops to go into energy without dramatically increasing domestic prices.

According to the Department of Labor's Consumer Price Index, food and beverage prices were up 4.4% over a year earlier as of Oct. 2007. Both transportation and medical inflation were higher. Energy? Up a whopping 14.5%. In the first ten months of 2007 petroleum-based energy costs increased at a 20.6% annual rate. Rising oil prices, not commodity prices, are the biggest cause for food inflation. Historically, energy increases the price of food more than a commodity price.

Those facts may lead one to conclude the pundits are lashing out at the wrong industry. The oil companies still have a monopolistic hold on transportation fuel in this country. In 2007 revenue for Exxon Mobil Corp., the world's biggest publicly traded oil company, hit $102 billion. That is enough money to buy the entire U.S. corn production — twice over. Who is really in charge here?

Increased competition in transportation fuels will help discipline a market dominated by a handful of multinational oil companies that are extracting monopoly profits from U.S. gasoline consumers.

Smear campaign

In fact those who smear corn ethanol and biofuels in general have a vested interest in lower biofuel production and, secondarily, lower corn prices.

Not happy enough with record quarterly profits, oil companies are threatened by the Renewable Fuels Standard (RFS), a federal policy that mandates more and more use of biofuel blended into gasoline to reduce energy dependence on foreign sources. RFS started with 4 billion gallons in calendar year 2006 and will nearly double to 7.5 billion gallons by 2012. But America's ethanol industry is at 7.5 billion gallons now. That is why Senators like John Thune, R-S.D., have brought up an amendment in the Farm Bill that would require an RFS of 8.5 billion gallons by year-end 2008 and 36 billion gallons by 2022.

House and Senate leaders are reportedly discussing alternative language that would result in a bill requiring 20.5 billion gallons of renewable fuels by 2015, with 15 billion gallons produced from grains and 5.5 billion gallons of advanced (cellulosic) biofuels.  

That higher RFS would take more market share from Big Oil, a story you probably won't hear from Katie Couric. You can bet that oil lobbyists are pressing the flesh on Capitol Hill and in editorial offices of the mainstream media. Their message has nothing to do with windfall profits they're making on $95 per barrel oil. It's not even how food prices are going up domestically — that might bring more attention to those higher energy prices.

No, the message is, "look what these biofuels are doing to the poor and starving of this world. We can't keep doing this." It's big on emotion, short on reality.

The other party interested in lower corn prices? Our friends in the U.S. livestock industry. My, what strange bedfellows these two make.

That's a toughie, because cattlemen are corn farmers' best customers. But National Cattlemen's Beef Association (NCBA) policy is specifically opposed to increasing the government mandate. "For cattlemen, any increase to the RFS mandate would be too much because renewable fuels production should be market driven, not government driven," says Jason Jordan, NCBA manager of legislative affairs.

"Subsidized ethanol production and mandated demand through an inflated RFS — when the infrastructure is just now developing — is a recipe for disaster when there's a short corn crop," adds NCBA Chief Economist Gregg Doud.

But the fact that biofuel infrastructure is still developing is a good case for growing the RFS. Ethanol plants may or may not break even this year without more demand, even if it is from mandates. Those plants will be mothballed.

Food aid drops

Higher commodity prices are getting blamed for a recent sharp drop in food aid. According to World Food Program, (WFP), a UN-funded humanitarian organization, aid has dropped from 10 million tons in 1995 to 6.7 million tons last year - the lowest in 15 years and 18% lower than in 2005.

True, demand for our commodities has driven world prices higher. But that demand has almost zero impact on African farmers, or subsistence farmers in general, because subsistence farmers don't compete in that world commodity market. Whether our corn is $2 or $4 probably makes no difference to them.

Where the argument is correct is how higher prices — both oil and commodities - cut into budgets for groups helping to feed malnourished people.

According to John Powell, Deputy Executive Director at WFP, "The cost of obtaining basic food commodities - wheat, rice, corn - went up by some 50% over the past five years, while fuel prices have risen by an average of 40%."

Powell rightly uses the words "cost of obtaining basic food" and links that cost with the rise in energy prices.

WFP's new budget projects another increase of 35% in commodity prices over the next two years - which Powell estimates will translate into roughly 780,000 less metric tons of food it can purchase for the poor. 

Higher commodity prices are a fact and we shouldn't be ashamed to profit. We'll need these higher prices as farmers get slammed with input prices jumping 20 to 30% in 2008.

Four-step solution

So how do we solve the food aid situation?

Reform the farm bill. For too long our farm policy has put money in the hands of the wrong people. Yes, only a few, but when celebrities and sports heroes are getting farm payments, the system must be reformed. If we don't reform farm policy we risk losing credibility with Joe Consumer, who may stop supporting farmers when Congress suggests we increase biofuel mandates. Plus, a more efficient farm bill could pass savings on to feed more poor people.

Increase food aid contributions through the government program P.L. 480, the largest program available to send U.S. ag commodities to developing countries.

Drop the mandate that says at least 75% of the gross tonnage of commodities exported under P.L. 480 must be shipped on privately owned U.S. flag commercial vessels. Open competition reduces costs and improves efficiencies.

Start making cash contributions to developing country governments so they can make local purchases. There's a good argument for this. Providing commodities is significant and should continue, but adding cash that can then be used for local purchases boosts demand for local subsistence farmers.

This country has set a goal to wean itself off petroleum. No one said that process would be simple, easy, or less expensive. But it still remains the nation's goal.

Biofuels are not a perfect answer to the problem. They are only one piece of the puzzle. But to dismiss their potential impact on foreign oil dependence is short-sighted at best. There is no more cheap petroleum in the world. American consumers need to wake up and realize the goal to move beyond oil is attainable, but not without a change in attitude and yes, some sacrifice.

In any case, the discussion deserves thoughtful commentary, not empty rhetoric.

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