INSIGHT: Corn, biofuels launch counter-attack

01 May 2008 16:24  [Source: ICIS news]

By Joe Kamalick

Ethanol firms & farmers throw a punch at oilWASHINGTON (ICIS news)--US corn growers and biofuel firms rose to defend Lady Ethanol this week, slapping a gauntlet of charges against big oil, speculators and backward governments for food price increases lately laid at the lady’s door.

After a months-long drumbeat of reports and mainstream news stories finding fault with ethanol on energy, environmental and efficiency grounds, biofuels producers and their feedstock corn growers called media to the National Press Club here to witness their counter attack.

The headliner was John Block, former US secretary of agriculture in the Reagan administration and a long-time corn farmer in Illinois, who conceded that ethanol-driven demand for corn has contributed to increasing food costs - but in a very minor way.

Block argued that the main engines of increasing food costs worldwide include high oil prices, growing food demand in developing countries, droughts that have hurt grain crops globally, commodities speculators, the weak US dollar, grain export restrictions among some Asian producing nations and opposition to genetically modified grains that produce greater yields.

“Food demand is escalating in China, India and other developing countries where people want more animal protein instead of just rice and wheat,” Block told a press conference.

“The droughts in Australia and elsewhere have hampered wheat production, and when stock prices fall on Wall Street as they have this past year and more, speculators invariably turn to commodities such as food grains,” he said.

“There is a lot more happening out there than just the minor influence of biofuels, and it is unreasonable to blame biofuels for a major part in this,” he said.

Tom Buis, president of the National Farmers Union (NFU) and himself a farmer, said he has been disturbed by the number and variety of false accusations against corn ethanol.

Among other recent news stories, Buis cited last year’s report of riots in Mexico over a shortage of corn flour for tortillas, disturbances blamed on ethanol-related corn shortages.

“In fact, tortillas are made from white corn, not yellow corn, and under a US-Mexico trade agreement we are prevented from exporting white corn to Mexico in excess of 2% of their consumption, so ethanol is blameless there,” he said.

Buis noted that in advance of last year’s US Fourth of July holiday - the heaviest beer consumption period in the US calendar - brewers blamed their price hikes on the ethanol demand for corn.  “But beer is made from rice and barley, not corn, so it had nothing to do with ethanol,” Buis said.

A shortage of pasta and related price increases in Italy was said to be caused by ethanol demand for corn, Buis said, but he pointed out that pasta is made from durum wheat, not corn. In addition, durum wheat varieties typically are not grown in corn-friendly climates, so the charge of crop switching is invalid.

As did Block and other biofuels or agriculture spokesmen at the conference, Buis pointed his finger at sharply increased oil prices as the principal culprit for food price hikes. A one-third jump in oil cost will generate nearly a 1% rise in food prices while a parallel increase in corn prices will cause a food price increase of only 0.3%, he said.

Rick Tolman, chief executive of the National Corn Growers Association, blamed a “clever misinformation campaign that is trying to turn Bo Peep into an axe murderer”.

He pointed out that corn grown for ethanol is a different variety than that farmed for food, and that US corn exports have grown in recent years, indicating there is no price-driving shortage of the grain.

Tolman also noted that US corn crop yields have doubled in the past 40 years and are likely to double again over the next two decades, meaning there will be enough corn for fuel and food production.

The rash of negative media and institutional reports about corn ethanol, he said, “are part of a clever misinformation campaign”.

“If you want to know the source of this misinformation, look at $4/gal gasoline and $120/bbl oil,” Tolman said. 

He suggested that oil producers and refiners have encouraged negative reports on biofuels to direct attention away from huge energy cost increases, especially in poorer countries that rely chiefly on oil imports.

Bob Dinneen, president of ethanol trade group Renewable Fuels Association (RFA), also cited sharp price increases for oil, gasoline and diesel fuel along with a surge in global food demand, the weak dollar and speculators as the real culprits in food price increases.

“Without question, the common denominator underlying all of the crises affecting the globe today is the skyrocketing price of oil,” Dinneen said.

He also blamed European nations and some African countries for government policies banning genetically modified grains technology that could improve crop yields on both continents.

Block said that a positive side to rising food prices worldwide will be an inevitable increase in agricultural investments globally and an increasing acceptance for genetically modified food grains.

Block, Tolman, Buis and Dinneen all called for increased US domestic oil and gas exploration and drilling along with alternative and nuclear energy development to help bring down the cost of oil and natural gas.

Dinneen said that while his association and farmer groups would continue to press the case for ethanol, he did not think the rash of criticism will seriously threaten support for biofuels on Capitol Hill.

“I don’t see an erosion of support on the Hill,” he said. “Congressional and other policymakers are studious and are not likely to make decisions based on news reports.”

He cautioned too that new efforts under way to cut back or even halt the new US mandate for 36bn gal/year of biofuels production and consumption by 2022 could undermine the long term goal of producing biofuels from non-food cellulosic feedstock such as switch grass and wood chips.

“There may be some little loss of support” as a consequence of recent bad press, Dinneen said, “but it is our job to correct that.”

For more on biofuels see Simon Robinson’s Big Biofuels Blog 

By: Joe Kamalick
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