Corn prices have spiked this year due to the severe drought engulfing America's farming regions. Now cattle raisers are up in arms about the soaring cost of the corn they use to feed their livestock. Their solution? Stop using so much of that corn to support the ethanol mandate.
The surge in grain prices amid the worst drought in the U.S. in more than half a century, has led to livestock farmers demanding the Obama administration reduce or temporarily cancel a federal mandate, which requires part of the corn crop be set aside to produce ethanol for blending into cleaner-burning gasoline.
The livestock lobby argues such a waiver will free up more supply and help ease record prices for corn, a key ingredient for animal feed. This year gasoline refiners will use some 13.2 billion gallons of ethanol...
The debate is resurrecting painful memories of the food crisis of 2008 when farmers diverted corn crops from food production into the lucrative biofuel market. That contributed to a jump in prices and sparked food riots in Haiti, Bangladesh, Egypt and Mexico.
Now, a variation of the same 'food-versus-fuel' debate is pitting livestock producers against corn growers and the U.S. ethanol industry. But cattlemen and ranchers looking for a reprieve of the mandate by the U.S. Environmental Protection Agency (EPA) are likely to be disappointed.
Washington "remains unwilling to make changes to the Renewable Fuels Standard (RFS) and is therefore not likely to grant waivers," said Divya Reddy, Global Energy & Natural Resources analyst at consultancy Eurasia Group.
Before we go on with this story, and since we are about to discuss biofuels made from corn, I want to make sure you know all about this important word—
B O O N D O G G L E
Work or activity that is wasteful or pointless but gives the appearance of having value
With that out of the way, let's move on. In the name of drought relief, the House of Representatives attempted to placate the restive beef growers with a $383 million bribe, but they are still unhappy. Meanwhile, the ethanol lobby has not sat idly by. They refuse to be outgunned by K-Street cattle raisers.
Eight biofuels groups are forming a coalition to coordinate messaging to combat calls to limit a federal mandate for renewable fuels because of the drought.
The groups said the drought has raised the profile of the renewable fuel standard, which requires 36 billion gallons of renewable fuels to be blended into traditional transportation fuel by 2022.
Various lobbying groups [including cattle raisers] argue this requirement should be waived because of the drought, which they say has caused the price of corn used for food and animal feed to skyrocket.Brent Erickson, executive vice president with the Biotechnology Industry Organization, told E2-Wire on Friday the drought has led to misinformation about the rule.
“There’s a lot of hype and hyperbole going on by the industrial livestock producers and the petroleum refiners,” Erickson said. “Our goal is to make sure that our voice is heard and that the facts are out.”
What are the facts?
The new organization, called the Biofuels Producers Coordinating Council, aims to defend the renewable fuel standard.
That rule requires 15 billion gallons of corn-based ethanol to be blended into traditional transportation fuel by 2022.
The remaining 21 billion gallons of that rule will be filled by advanced biofuels such as cellulosic ethanol, which is not yet produced at commercial scale.
According to Robert Bryce's Slate article Food As Fuel, we will use nearly 37% of this year's (estimated) corn crop to make ethanol because of the Federal mandate. Bryce is against this because making ethanol from corn is an energy inefficient boondoggle.
Over the past six weeks, corn prices have soared by about 50 percent. They recently hit $8.20 per bushel, an all-time high. And if drought conditions in the United States and Europe persist, prices may continue climbing. Several factors are influencing grain prices, among them the reduced amount of grain available in storage and increased meat consumption in the developing world. (Remember that most corn is used as livestock feed, not food for humans.) But there is no doubt that the corn ethanol mandates imposed by Congress are distorting the market, which will mean higher prices for everything from milk to cheeseburgers...
And yet the ethanol scam continues. Indeed, thanks to the Environmental Protection Agency, which is allowing retailers to increase the percentage of ethanol that can be mixed into gasoline, the biofuel disaster now extends from the grocery store to the service station. That could mean bad news for your lawn mower and weed whacker, which aren’t designed to run on fuel containing more than 10 percent ethanol. If all that weren’t bad enough, consider this: The United States is now exporting large quantities of corn ethanol to—wait for it—Brazil.
[My note: Making ethanol from sugar cane as Brazil does is far more energy efficient than making it from corn. On the other hand, you've got to cut down forests to clear the land so you can grow the sugar cane.]
You don’t have to be an economist to understand why the ethanol sector is driving food prices higher. This year, about 4.3 billion bushels of corn will be converted into motor fuel, according to Bill Lapp, president of Advanced Economic Solutions, an Omaha-based commodity consulting firm. That means that nearly 37 percent of this year’s corn crop, which Lapp estimates to amount to about 11.6 billion bushels, will be diverted into ethanol production.
It is a tale of drought, corn, cattle, ethanol and craziness. This story is about politics, of course. Do you remember the great radio comedy team Bob & Ray? When they were asked why they didn't do political humor, Ray Goulding responded with a rhetorical question—
How do you make it funnier?
And on that sublime note, mercifully, I will conclude today's post.
Bonus Video — Bob & Ray on Saturday Night Live