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August 2008 Archive for Top of Mind

RSS By: Jeanne Bernick, Top Producer

Jeanne, Top Producer Editor, grew up on a beef cattle operation in Southwest Missouri and now writes from the heart of corn country in Eastern Iowa.

Biofuels create enviable position for some

Aug 22, 2008
 Corn and soybean farmers are in an enviable position, and it’s all due to projected expansion in biofuels, according to economist Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State University. Babcock testified this week before the U.S. Senate Agriculture Committee at the Omaha Field Hearing on food and fuel production.
 
For corn farmers, increasing ethanol mandates means they have a new built-in demand of between 25% and 30% of their crop, according to Babcock. Just to entice farmers to plant adequate corn acreage in the coming years will require prices high enough to cover the additional costs involved in increasing corn plantings from 80 to 90 or 95 million, he said.
 
“I estimate that prices below $3.50 to $4 per bushel will result in inadequate acreage,” Babcock said. “Hence, I do not expect prices to fall below this level in the next five years.”
 
Babcock went on to testify that if we continue to have crude oil prices in excess of $100 per barrel and a string of good weather years that drive price down below $4 per bushel, then the economics of corn ethanol production would look “so good that we should see a new round of investment take place, taking capacity of the corn ethanol industry beyond mandated levels.”
 
As for the high feed costs on the U.S. livestock industry, he described the future as “fairly straightforward”: livestock prices will eventually increase enough over the next year or two to cover producers’ increase feed costs. There are only two ways this can happen. Either U.S. livestock producers will reduce production or producers in other countries – who face the same feed cost pressures – will reduce production.

What are your thoughts on this "enviable position?"
 
For Babcock’s complete testimony, visit: www.card.iastate.edu/presentations/

More good than harm

Aug 08, 2008
The Environmental Protection Agency (EPA) announced today it is denying a request submitted by the State of Texas to reduce the nationwide Renewable Fuels Standard (RFS). EPA Administrator Stephen Johnson says mandated biofuels volumes do more good than harm to the economy and therefore do not fit the criteria established by law for the EPA to waive the national mandate.
 
EPA conducted detailed analysis, consulted closely with the Departments of Energy and Agriculture, and carefully considered more than 15,000 public comments in response to the Texas request. This is the first RFS-related waiver request, and not likely to be the last.

The EPA decision sends a signal that the U.S. government still supports biofuels development, despite calls from at least 70 legislators to grant the waiver.
 
After all, if a waiver had been granted, it would have resulted in little incentive for investment in next-generation ethanol. The Department of Energy recently awarded up to $40 million to two cellulosic biorefinery projects.
 
Should the current RFS be waived any time soon, the department will find it very difficult to find investors in next-generation ethanol, which is the ultimate goal of the RFS.
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