The food versus fuel debate is back in full force, creating division between the crop and livestock industries at a time when it would behoove them to work together against the very real threat of animal activism.
This reached an interesting level last week when Rick Tolman, CEO, National Corn Growers Association (ZimmComm client) published an editorial taking the American Meat Institute to task for joining in a coalition with groups like the Environmental Working Group, National Resources Defense Council and Friends of the Earth. These groups are well documented (pdf) as being extremists with an agenda harmful to agricultural production. They also have their own relationships with other extremist groups like the Humane Society of the United States. Rick says in his editorial, “As the self-proclaimed representative of the “companies that process 95 percent of red meat and 70 percent of turkey in the U.S. and their suppliers throughout America,” AMI really should avoid such curious connections.” I think that sounds very logical. You can listen to an interview with Rick on this subject here:
Now here’s where I can provide you with an example of how social networking is useful. I tweeted a link to Rick’s editorial and asked AMI for their response. They tweeted me back a link to their response within a couple days. It is attributed to J. Patrick Boyle, President/CEO, American Meat Institute and starts out by saying, “AMI remains committed to our opposition to ethanol subsides and tax credits, a position that is supported by a broad cross-section of producers, processors, consumers and, especially, American taxpayers.
In fact, the federal government has pumped as much as $1.95 per gallon of taxpayer money into subsidies for the production of corn-based ethanol.” The response lists the issues they’re concerned about. So kudos to AMI for creating a response and responding to my request!
However, I have to point out that they didn’t mention their relationship with these extremist groups at all, which was the main focus of Rick’s editorial. I really don’t understand it anymore than Rick does. Seems very counter productive for their members. They’ve helped fund an ad in “The Hill” (pdf) which suggests that ethanol is bad for rural America. Kind of hard to justify that folks. That ad campaign is also funded by the Grocery Manufacturers Association which has aggressively used rhetoric and mis-information to blame ethanol for high food prices. The ad promotes a website called FollowTheScience.org which I’ve heard said should be called FollowTheMoney since it’s mostly a collection of anti-ethanol documents or studies that were funded by the supporting groups and that includes AMI.
It’s also interesting to note that AMI represents meat processors and packers yet their response seems to suggest they represent farmers and ranchers, “American ranchers and livestock producers are the best in the world at what they do – they can compete with anyone on the planet. And they’re not opposed to competing for corn, as long as they can compete for it on a level playing field.”
I think it’s an unfortunate situation. I’ve spoken with lots of corn farmers and beef producers on this issue. In fact, there are quite a few who do both. It is certainly a divisive issue. How would you solve it? I invite your comments and suggestions. But keep it friendly okay?
Post Update: NCGA CEO, Rick Tolman, has published a statement in response to the AMI statement. It’s title, “It’s Not About Ethanol.”
Annual U.S. corn ethanol production is currently about 12 billion gallons and is projected to increase to 15 billion gallons. Ethanol produces about two-thirds as many miles-per gallon as gasoline; therefore, 15 billion gallons of ethanol can effectively replace only 10 billion gallons of gasoline.
Ethanol production consumes significant amounts of energy. This includes the fossil fuels used to produce fertilizer, power farm equipment, and process corn into ethanol. Estimates of the actual amount of energy contained in corn ethanol compared to the energy used to produce it generally range from less than 1 to 1 to as high as 1.67 to 1. Even at the higher 1.67 to 1 ratio, 9 billion gallons of the 15 billion gallons of ethanol to be produced would be required to replace the energy used in production. The remaining 6 billion gallons of ethanol could effectively replace about 4 billion gallons of gasoline or about 3.3% of the estimated 120 billion gallons of gasoline used annually in the U.S.
The oil reserves in Alaska’s Arctic National Wildlife Refuge (ANWR) are estimated at 4.3 billion barrels or more. While this amount of oil is insignificant in comparison to our overall energy consumption, it dwarfs the amount of energy gained by converting massive amounts of food into ethanol. Each barrel of oil yields about 19 gallons of gasoline, 9 gallons of diesel fuel and several gallons of heating oil, jet fuel and other petroleum products. The 81 billion gallons of gasoline produced from 4.3 billion barrels of oil would replace the energy gained from producing 15 billion gallons of corn ethanol per year for 20 years. Some estimates of the ANWR oil reserves are as high as 16 billion barrels or enough gasoline to replace the energy gained from ethanol production for almost 75 years.
The wholesale price of ethanol is currently around $1.55 per gallon compared to $2.20 per gallon for wholesale gasoline. However, since ethanol achieves only two-thirds the mileage of gasoline, it should sell for two-thirds the price of gasoline or only about $1.47 per gallon. To replace a gallon of gasoline with ethanol, consumers pay for 1.5 gallons of wholesale ethanol, 25 to 50 cents per gallon retail markup on 1.5 gallons, and taxes to offset the 45 cents per gallon blender tax credit on 1.5 gallons of ethanol for a minimum total of about $3.40. Is that holding down the retail price of gasoline which is around $2.60?
Ethanol advocates claim that using corn to produce ethanol does not cause significant increases in food prices. They especially like to remind us of how little of the cost of a box of corn flakes is attributable to the corn content. Pilgrim’s Pride, a large U.S. chicken producer, filed for bankruptcy protection in late 2008. A major contributing factor was an increase of almost $1 billion per year in its feed costs. Producers of other animal proteins such as pork, beef, milk, and eggs have also suffered from increases in feed costs. These producers, out of absolute financial necessity, have significantly reduced production in an effort to force food prices high enough to offset their increased feed costs.
World fertilizer prices have shown wide fluctuations since 2005 when the Government mandated the increased use of corn ethanol. The production of nitrogen fertilizer requires large amounts of natural gas. Phosphorus is produced by mining phosphate rock, and potash is produced from mineral salts obtained primarily from deep mines. The U.S. has limited quantities of high quality phosphate rock and imports about 85% of its potash needs from Canada. How can we assume that we have the resources needed to indefinitely produce great amounts of crops for ethanol production while preserving the resources that will be needed by future generations to produce food?
The ethanol industry warns that 112,000 jobs could be lost if tax credits are discontinued. Ethanol production is not labor intensive. The typical 100 million gallon per year ethanol plant hires fewer than 50 people. The current production of 12 billion gallons of ethanol could be accomplished by 120 plants hiring fewer than 6,000 people. The 38% reduction in production projected by the industry would eliminate about 2,300 production jobs. Pilgrim’s Pride has reduced its workforce from about 55,000 to 41,000 since it began struggling with higher feed costs. Did those 14,000 job cuts result in the elimination of 672,000 other jobs?
The $5.4 billion tax credit represents $900,000 for each of the 6,000 people needed to produce 12 billion gallons of ethanol. It represents $48,000 per person for each of the total 112,000 people who would lose their jobs according to the claims of the ethanol industry. That is not a one-time credit that creates a lasting job but is given each and every year. This seems to be a terribly expensive way to create jobs. The elimination of the tax credit would mean that big oil companies would be paying $5.4 billion more in taxes every year that could replace an equal amount of the tax burden now shouldered by low and middle income taxpayers. The additional spending by those taxpayers is likely to provide a greater economic contribution than would additional profits for big oil companies and dividends for their stockholders.
Even with Government subsidies since 1978, the ethanol industry has not significantly increased the U.S. fuel supply nor has it achieved economic viability without subsidies and protective tariffs. While ethanol producers should have the freedom to produce and sell their product, the U.S. Government should not dictate the diversion of massive quantities of food to the production of expensive low-quality fuel. Let’s stop the mandates and subsidies and let the fate of ethanol be decided by the marketplace. Consumers should have the opportunity to make their own buying decisions rather than having those decisions made for them by the U.S. Government and the ethanol lobby that seems to exert such great influence on that Government.
You consider the Environmental Working Group, National Resources Defense Council and Friends of the Earth extremist groups?!! I know people in all three of these groups, and they are very level-headed, pragmatic and with a strong social conscience. Perhaps they are naiive at times as to what can be accomplished politically, but the last time I looked that wasn’t something that qualified somebody as extremist. If these groups are extremist, what do you call Al Qaida and the Klu Klux Klan?
Hey Walter. I almost deleted your comments since they don’t address the topic of the post at all. I wasn’t inviting a diatribe about ethanol policy. I was asking for ideas for how we can bring together agricultural interests that are divided on this issue. And I’d like to know why a group like AMI would side with organizations that don’t seem to have their best interests at heart. I went ahead and posted your comment to show how blind antagonists against developing biofuels like ethanol are. I guess your mantra is “don’t address the issue, just hammer out your policy points.”
Ron, are you trying to compare these groups to terrorists and racists? Some of groups that these associate with do come pretty close IMO. These groups practice the art of misleading information. They also make outrageous claims that directly contradict established research. If you look into the information provided by organizations like the NCGA you’ll find lots of resources that counter their claims.
Good ol’ Walter G is incorrect on nearly every point. I get about 12% fewer MPG on E85 than I do on gasoline- not 30% less. But I won’t belabor the point.
This much is true- there is a finite amount of oil out there. Whether we replace it with renewable fuels now, or 25 years from now, is really the only debate there is. Farmers in this nation will be dedicated to providing not only the food to feed us, but also the fuel we will need to get around in future years.
I don’t use gasoline- haven’t in three years- as I am a retired Army Officer, and I know how much oil actually costs, in terms of the blood of our nation’s soldiers, sailors, airmen and marines. We NEED ethanol, and biodiesel, to provide a way to break our addiction to foreign oil.
Now- to the subject at hand- How do we provide BOTH food and fuel for the future? We learn that everything is a balance- it’s not one or the other. Farmers are doing incredible things with corn production- without expanding the amount of land, we are producing more and more corn crop each year. We can, and we will, produce both food and fuel in the future.
The truth is there are more than 4 billion bushels of corn sitting today in storage – we are producing more than we need to meet both needs. And we have the capability to do even more in the future. Besides- ethanol production also makes a heck of a lot of Dried Distiller’s Grain (DDG) which can be added to feed.
So it shouldn’t be a war between the two interests- both gain when DDG is produced. Both gain when there is a market for ethanol and for meat production. And we all gain when we are able to help break the addiction to foreign oil that is crippling our nation.
Chuck,
Feel free to delete the previous comments and I will try to be a little more constructive this time.
It is going to be difficult to get many dairy, poultry, and livestock producers to support the production of ethanol and especially government mandated and subsidized production of ethanol until they are able to recover from the financial disaster they have recently suffered. The severe economic recession of the past couple of years destroyed a significant amount of demand for their products. Even as they tried to cut production to match demand, that demand seemed to just keep shrinking. Their feed costs, while moderating from the extreme highs of 2008 have still remained well above the historical level established over many years.
While the government mandates that a certain amount of ethanol is consumed in the U.S. and rewards blenders for using the specified amounts, it does not mandate that certain amounts of chicken, beef, pork, etc. are consumed and gives little or no support to those producers when feed costs rise.
A good way to get more support for ethanol from meat producers would be to level the playing field at least a little. The ethanol industry could advocate some degree of government assistance to other corn users when corn prices spike. Is the ethanol industry willing to set some lower limits on its production if we have a severe crop failure? It must appear to many producers that the government is willing to do whatever it takes to make the ethanol industry viable while seeming to care little about the other industries that depend on an affordable supply of corn. I think meat producers would like to see a little more understanding of the challenges they face and some safeguards against possible extreme increases in the cost of corn.
US tax payers pay well over $2.00 a gallon in direct and indirect taxes for the high priced gasoline sourced from Persian Gulf crude oil. Do we pave the streets of the Middle East with our blood and hard earned income or do we invest in ourselves? The solution is to pay those corn farmers for producing FUEL, food, and fiber. Competition from farmers throws the oil industry from an oligopolistic market player to one of perfect competition; thus, reducing overall fuel prices. Farmers should not have to bend down to the huge US food processors and grocery chains. By preventing the growing ethanol market, the food processors make greater profits for themselves off the backs of farmers.
“These groups practice the art of misleading information. They also make outrageous claims that directly contradict established research. If you look into the information provided by organizations like the NCGA you’ll find lots of resources that counter their claims.”
I assume that you are being ironic. Because that is exactly the view of that those who are skeptical about biofuels have in respect of the organizations that represent that industry.
Just a correction on the ANWR figures listed in the first comment by Walter G. Sorry to nitpick but…
The USGS 1998 report on ANWR “in-place” reserve estimates were 16-42 bbls (high / low estimate), of that amount using a mid 1990s average of 37% technical recovery rate (today recovery rates are above 60%), the USGS estimated 95% probability of 5.6bbls, a mean average (50% probability) of 10.4bbls, and a 5% probability of 16bbls. Those figures, again, based on a 37% recovery rate, making them completely out of date with todays technological capabilities. The “4.3″bbls number quoted by Walter G. was taken from the USGS estimates of “Federal Land Only”, within the 10-02. The 10-02 contains Federal, Native and State lands, thus his figure quoted is incorrect as stated as an ANWR total reserve.