Labels: ethanol, production

When it comes to growing and harvesting switchgrass as an energy crop, recent studies have shown that farmers likely could grow switchgrass for $30 to $35 a ton in the Midwest. However, many cellulosic-ethanol technology companies have not been able to bring down their production costs far enough to allow them to pay farmers enough to grow such a crop at a profit.

Petiot said cellulosic plants will require at least 7,000 tons of feedstock per day and will need to be able to produce their own enzymes near the plants to make it economical.

Corey Radtke, a scientist at the Idaho National Laboratory, said that when it comes to storing biomass materials such as switchgrass or corn stover, the U.S. faces a unique situation.

For example, he said while the moderate-to-moist climate in the eastern half of the country is virtually ideal for growing biomass crops, it is not a good area to store crops like switchgrass. That's because such cellulosic-ethanol feedstocks can be ruined if they become wet during storage.

In the much drier and warmer western half of the country, Radtke said, farmers struggle to grow biomass crops, but the climate is perfect for storing biomass. [More]

Labels: ethanol

In other words, the lion's share of inducements have gone to production—call it supply-side energy policy. But crudely stimulating this ethanol is actually the cause of the ethanol backlash. As production increases, the price of the commodity used in the process (corn) rises. So does the price of the expertise and materials needed to build capacity. During the railroad boom, the cost of steel and the salaries of engineers rose. During the dot-com boom, the cost of fiber-optic capacity and the salaries of Web programmers rose. The Wall Street Journal reported that the cost of building a new ethanol plant has risen from $1.50-per-gallon last year to $2.20 per gallon today.

The combination of rising commodity prices and production costs and a glut of product makes it more difficult for the manufacturers to turn a profit. In the second quarter, Verasun's gross margins shrunk to 19.2 percent, compared with 41 percent in the same quarter the year before. In its second quarter, Aventine gross margins shrunk from 11 percent to 6.9 percent. Verasun said earlier this week it would suspend construction of a refinery in Indiana. [More]

Labels: ethanol, policy

Yet another so-called "study" about the impact of corn-based ethanol on the nation's food supply has been issued. Like the others, its authors choose facts that support their opinion, and disregard everything else. Once again we're told ethanol has little impact on the nation's dependence on foreign oil and is driving up food prices. "Impact," we guess, is a relative term. Ethanol is replacing 200 million barrels of imported oil per year. With the price of oil above $80/barrel, ethanol's impact on oil imports alone is more than $16 billion dollars. [More]

Labels: energy, ethanol

Soaring food prices, driven in part by demand for ethanol made from corn, have helped slash the amount of food aid the government buys to its lowest level in a decade, possibly resulting in more hungry people around the world this year.

The United States, the world’s dominant donor, has purchased less than half the amount of food aid this year that it did in 2000, according to new data from the Department of Agriculture.

“The people who are starving and have to rely on food aid, they will suffer,” Jean Ziegler, who reports to the United Nations on hunger and food issues, said in an interview this week. [More]

But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.

“The end of the ethanol boom is possibly in sight and may already be here,” said Neil E. Harl, an economics professor emeritus at Iowa State University who lectures on ethanol and is a consultant for producers. “This is a dangerous time for people who are making investments.”

While generous government support is expected to keep the output of ethanol fuel growing, the poorly planned overexpansion of the industry raises questions about its ability to fulfill the hopes of President Bush and other policy makers to serve as a serious antidote to the nation’s heavy reliance on foreign oil. [More]

Labels: ethanol, food, media, policy

The dramatic increase in the use of crops for fuel is going to increase food prices, at least for the next several years. The magnitude of that increase however, may not be as large as some expect. Probably the three most important reasons why the impact will not be as large as in past years are: 1.) the share of the retail food dollar contributed by the farm level commodity value has been sharply reduced to just 20 percent today; 2.) the importance of food in consumer budgets has continued to drop such that the "food and beverage" category in the Consumer Price Index (CPI) is now weighted at just 15 percent; and 3.) the sources of our food are more global and diverse than in the past.

Retail level food prices are expected to increase an additional 1.2 percent to 1.8 percent above their 2006 level due to higher farm-level grain and commodity prices partially attributable to the use of grains and oilseeds for biofuels. This will roughly parallel the calendar years of 2007 and 2008. This analysis is based upon the assumption that higher farm-level commodity prices are eventually passed to retail food consumers. Our assumption is that transferal is dollar for dollar. Not all of the current increased food inflation is attributable to increased use of crops for energy, as poor weather conditions have also contributed to poor world wheat crops in 2006, and to losses of some fruit and vegetable production in 2007. [More]

Labels: ethanol, food, policy

Americans are driving cars that get better mileage, and more are driving vehicles that use fuels taxed at lower rates than gasoline, such as ethanol, or making their own fuel and not being taxed. That means gas tax revenue isn't growing nearly as fast as the number of miles driven.

In addition, the costs of road construction materials have skyrocketed because of heavy demand from India and China. Congress and many state legislatures are reluctant to increase gas taxes, especially at a time of high prices at the pump. The federal gas tax of 18.4 cents a gallon has not been increased since 1993; 24 states have not raised their gas taxes since 1997, according to the American Road & Transportation Builders Association.

That has made a mileage fee more attractive to some agencies. The University of Iowa study is funded by the Federal Highway Administration and 15 state departments of transportation. [More]

Labels: ethanol, taxes

The OECD will say in a report to be discussed by ministers on Tuesday that politicians are rigging the market in favour of an untried technology that will have only limited impact on climate change.

“The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits,” say the authors of the study, a copy of which has been obtained by the Financial Times.

The survey says biofuels would cut energy-related emissions by 3 per cent at most. This benefit would come at a huge cost, which would swiftly make them unpopular among taxpayers.

The study estimates the US alone spends $7bn (€5bn) a year helping make ethanol, with each tonne of carbon dioxide avoided costing more than $500. In the EU, it can be almost 10 times that.

It says biofuels could lead to some damage to the environment. “As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural eco-systems such as forests, wetlands and pasture with dedicated bio-energy crops,” it says. [More]

Labels: economics, ethanol

The US is reviewing its federal Renewable Fuel Standard, which calls for the production of 7.5bn gallons a year of alternative fuels by 2012. This is expected to be reached well ahead of target, and the Bush administration has called for a benchmark of 35bn gallons by 2017, about half of it from ethanol.

Bill Veazey, Cargill's chief financial officer, said there needed to be "some kind of waiver" in any state-backed mandate. "There needs to be escape mechanisms so that you don't distort the food markets," he told the Financial Times.

Cargill said three of its five divisions delivered record results, and played down the importance of its asset management business, which has been the largest contributor to earnings in recent years.

"What we have is a broader and more diversified earnings' stream than last year," said Mr Veazey, pointing to the restructuring of the financial services business into two standalone entities, which have secured third-party investors to reduce Cargill's exposure.

However, Cargill's heavy investment programme - which it will continue to fund internally - and the potential volatility of financial services income have prompted ratings agencies to shift their outlooks for the group to negative in recent months. [More]

Labels: economics, ethanol, taxes

Now comes another woe, this one as icky as a biblical plague: millions of mouse-like rodents called voles feasting on everything from beets to potatoes in an infestation that has prompted a desperate, scorched-earth policy in one of Spain's agricultural heartlands.

Farmers unions say the Castille-Leon region in north-central Spain is crawling with an estimated 7.5 million voles, and the local government is baffled: It doesn't know the cause — or the solution. The invasion began gently 10 months ago but has snowballed to stunning proportions.

Spanish television aired footage of scores of voles darting in and out of holes in what would normally be rich, healthy farmland, or quivering in the throes of death brought on by pesticide. Some of the critters have even made it into gardens of homes in the region's main city, Valladolid, according to news reports. [More]

Labels: ethanol

• we are getting less from Iraq than in 2006
• we are getting more from Russia
  
• we are getting more from Algeria
• Saudi Arabia has replaced Mexico as #2
• Mexican production is slumping seriously.

Labels: ethanol

In the case of farm programs, it is easy to demonstrate that feed grain and oilseed prices are largely unaffected by U.S. farm subsidies, particularly since 1996 when Congress removed USDA's authority to increase commodity prices through acreage set-asides and subsidized storage. It is also easy to demonstrate that the small share of the final consumer food dollar that goes to the farmer means that even a doubling of feed grain and oilseed prices from expanded biofuels production will lead to relatively modest increases in the prices of meat and dairy products. Food prices are largely determined by costs and profits after commodities leave the farm. [More]

Labels: ethanol, food, policy

The highest-selling tract, totaling 165.44 acres, sold for $9,500 an acre and the lowest-selling tract, 62.31 acres, brought $4,950 an acre. That 62.31-acre-tract was only 70% tillable, says Dave Klein, vice president and managing broker, Soy Capital Ag Services, Bloomington, 309-665-0961, whose firm handled the sale. [More]

For the first time, dairy farmers could threaten to sell their products elsewhere since the global dairy market is suddenly thirsty for German milk. And there's particular interest in powered whey. Prices for the yellowy stuff, which is the foundation for many packaged food products, have more than doubled within a year. Globalization has finally reached a sector that for a long time was organized regionally. While the dairy sector in Germany is still connected with the image of the quaint Bavarian farmer and his bell-wearing cows, in reality it's become an industry of multinational corporations, stock prices and commodities markets.

Milk is in demand. The inventories of food producers have dried up. So too has Europe's proverbial sea of surplus milk. The much-maligned mountain of extra butter is also gone. Such positive developments have even encouraged the European Commission to consider reforming Europe's bloated agricultural policies further.

EU Agriculture Commissioner Mariann Fischer Boel wants to increase the bloc's milk quotas, which have been frozen in place for years. The intention is to push along the decision made by EU agriculture ministers to do away with the convoluted quota system that regulates Europe's milk production. But the quotas will only be completely eliminated in 2015. While that might not seem very ambitious, at least the basic laws of supply and demand have been reestablished for the first time since the regulations for the milk market were implemented in 1968. [More]

Dean sells organic milk and soy products through its WhiteWave Foods division. The organic milk is specifically sold under its Horizon brand, a segment battling the industry-wide oversupply of raw organic milk.

Organic milk costs more than regular, making retail competition aggressive as companies use lower pricing, marketing and expanded distribution to try to sell off excess supply. [More]

Labels: dairy, ethanol, farmland, food

Thanks to well-thought-out Farm Bill support programs, our farmers persevere, and American consumers benefit. In developed nations around the world, most families have not earned enough money to buy food for the year until April or May, but the average American family has done so in just five weeks.

[Translation: Subsidizing corn makes the price lower, and hence food cheaper]

Our nation has chosen a wise strategic and economic course of ethanol and biofuel development. This goal increases corn prices, but it has a negligible effect on the price of food in America. It's worth remembering that the box part of a box of cornflakes costs consumers more than the corn does. [More]

[Translation: The price of corn doesn't affect food prices] [My Comments]

Thus, it is no surprise that the price of corn has doubled in the past year — from $2 to $4 per bushel. We are already seeing upward pressure on food prices as the demand for ethanol boosts the demand for corn: Nationally, food prices were up 3.9 percent in April, compared to the same month a year earlier. Until the recent ethanol boom, more than 60 percent of the annual U.S. corn harvest was fed domestically to cattle, hogs and chickens, or used in food or beverages. Thousands of food items contain corn or corn byproducts. A spokesman for one of California's largest cattle ranches and feedlots noted that since the end of 2005, the company has experienced a 36 percent increase in the cost of feed, "which translates to an additional expense of $101 per head raised." Reflecting these trends, the National Cattlemen's Beef Association has demanded an end both to government subsidies for ethanol and to the import tariff on foreign ethanol.

The poultry industry is also squawking. The National Chicken Council is demanding remedies from senators who represent the big southern poultry states, and the National Turkey Federation estimates that its feed costs have gone up nearly $600 million annually. [More]

Labels: ethanol, livestock

The rising food costs fueled by ethanol demand are also affecting U.S. consumers. "All things that use corn are going to have higher prices and higher cost, to some extent, that will be passed on to consumers," says Wally Tyner, professor of agriculture economics at Purdue University. The impact of this is being felt first in animal feed, particularly poultry and pork. Poultry feed is about two-thirds corn; as a result, the cost to produce poultry--both meat and eggs--has already risen about 15 percent due to corn prices, says Tyner. Also expect corn syrup--used in soft drinks--to get more expensive, he says. [More]

One speaker in particular championed this concept, suggesting that the opportunities for premiumisation were almost limitless. Now don't get me wrong, I am well aware that the likes of Whole Foods and Tesco and brands like Rachel’s Organic and Green & Black’s have successfully travelled down this road in recent years. But something about his unqualified optimism didn't sit well.

I realised it was my own shopping habits that were causing my doubts. Increased inflation and rising interest rates here in the UK have without doubt blunted my own personal spending power, causing me to think twice before I drop the premium sausages into the basket, or reach for organic salad, rather than standard products.

The question must be asked then, how does this theory of unlimited premiumisation sit if we enter a sustained period of economic recession? In the UK and US, this question has been largely academic in recent years. [More]

Labels: economy, ethanol, food, organic

"Bioenergies have become a key factor in the functioning of agriculture markets," Loek Boonekamp, a senior OECD official, told reporters after the release of the study.

"In the medium term we believe that they could lead to prices on international markets rising quite considerably, at higher levels than what we had predicted in former outlooks and above the average of the last 10 years," he added.

Boonekamp said that farm prices, mainly grains, would likely rise by 20 to 50 percent over the next decade. [More happy economic talk]

Labels: ethanol

Unfortunately, U.S. corn land produces only 50 gallons worth of gasoline per acre per year—against an annual gasoline demand of 135 billion gallons. New U.S. ethanol plants coming on line could take 30 percent of next year’s U.S. corn for auto fuel—an unprecedented diversion of the world’s scarce cropland. Supplying the Bush goal of 35 billion gallons of ethanol per year would currently force farmers to clear more than 200 million acres of Midwest forest to supply even 10 percent of our gasoline demand from corn ethanol. [More]

Archer Daniels Midland, the nation's largest producer of ethanol fuel from corn, is setting its sights on a move into Brazil's sugar cane-based ethanol business, according to a published report.

The Wall Street Journal says ADM (Charts, Fortune 500) is exploring a variety of strategies to enter Brazil's ethanol market, ranging from building sugar-cane mills and ethanol plants from the ground up to acquiring sugar-cane companies. [More]

Labels: ethanol

Except - there is no ethanol "market." The ethanol business is driven by government planners, not freely acting buyers and sellers.

I didn't consider opportunities to portray ethanol distilleries as weapons in the global war on terror. I forgot about the 2008 presidential election, in which farm-state pandering will be crucial. In short, I forgot about the politicians, who show every sign of expanding the boondoggle to legendary dimensions and ensuring that investors pile into corn likker for years.

Things look bullish for ethanol projects whether or not they make economic sense. [More]

It's true that the ethanol stocks I wrote about last summer have declined on fears of a glut. Under current law, most gas can't contain more than 10 percent ethanol, and at some point all the gas will be blended. Most cars aren't supposed to use richer blends. A fall in gas prices would also hurt ethanol producers.

But have faith in the politicians, who still haven't found a limit on how often they can play the al-Qaida card. Ethanol investments are indeed a bubble, but with government's aid there's no guessing how big it'll get.

Labels: ethanol, future, politics

At a Brazilian ethanol conference June 4-5, Brazilian government-funded researchers said they have perfected a method of producing cellulosic ethanol that drastically reduces the cost of processing. At this point, the assertion -- and many other similarly optimistic claims made at the conference -- is unconfirmed. But should it prove true, the world could well be peeking over the horizon at a massive geopolitical, not to mention economic, shift. [More]

More tricky is the problem of the ethanol production itself. Cellulosic biomass is bulky and materially complex, unfit for the same methods of ethanol extraction used with corn. In order to even get the stuff into manageable form, processors must soak it in a pre-treatment bath, followed by an acidic or enzymatic digestion that splits it into simple sugars. [More]

Labels: biofuel, energy, ethanol, technology

Labels: biofuel, economics, ethanol, policy

Refiners would be forced to triple their use of fuel ethanol over the next decade, under legislation expected to start moving through the Senate this spring.

The legislation, outlined Tuesday by leaders of the Senate Energy and Natural Resources Committee, would require use of 18 billion gallons of biofuels by 2016 and 36 billion gallons by 2022.

All but 15 billion gallons of that biofuel each year would have to come from sources other than corn, such as crop residue, switchgrass and forestry waste. [More]

Labels: economics, ethanol, politics

"Why are we worried about pricing power on the part of corn processors?" she asked rhetorically in a report issued to investors Monday. The stock market has focused on the consolidation among corn processors, which has created a small number of corn-sweetener providers, the analyst observed, but sodamakers' ability to push back hasn't received similar attention.

With corn-sweetener prices moving steadily higher, and with some health groups arguing that sugar is a superior sweetener, "we believe that alternatives are more seriously being debated" among beverage-makers, McGlone wrote.

Given the possibility of a switch to alternative sweeteners in the longer term, she said, the consolidated buyer base may flex its buying muscle more than it has in the past, "and margin-enhancing future pricing for corn processors may be harder to come by." [More]

Labels: ethanol, food

Labels: ethanol, production

Yaniv Ben-Zaken, a local gas station owner, will be selling Kosher for Passover gasoline during the holiday this year. The move, Ben-Zaken says, has become necessary due to the increased ethanol content in gasoline required by the government. The ethanol is typically derived from corn, which is a forbidden food for Jews on Passover. And, according to Ben-Zaken, underJewish law, it is also forbidden to derive any benefit from corn. [More]

The “article” does get the two points of Jewish law correct. First, we are forbidden on Passover from having any hametz in our possession or ownership and it is forbidden to obtain a benefit from hametz during the eight days of the holiday. Hametz is any of the five forbidden grains (wheat, barley, oats, spelt, rye) that has been in the presence of moisture for more than eighteen minutes.

In Northern European communities around the 15th Century, the prohibition on eating hametz was extended to a category of grains called kitniyot: rice, millet, corn, and legumes. Because ground up rice flour or corn meal closely resembles wheat flour, Ashkenazi Jews exclude kitniyot from their Pesach diet as well. However, as “Rabbi Shalom Silver” is quoted as saying in the article, one may possess kitniyot and obtain a benefit from it, use it in any form or fashion, so long as one does not eat it. Baby powder that contains cornstarch, for example, is perfectly acceptable on Pesach, so long as one is not tempted to make a snack of it. [More of the debunking]

Labels: culture,