Ethanol Policy Field Hearing Settles No Issues

August 18, 2008 07:00 PM

via a special arrangement with Informa Economics, Inc.

Stacked-deck hearing favors ethanol proponents

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

It was mostly a stacked-deck field hearing by the Senate Ag Committee on Monday in Omaha, Nebraska. Those opposing ethanol use mandates and other subsidies for the renewable energy said they were not given an opportunity to address the field hearing to note the negative impact ethanol-fueled corn prices is having on their industry. Ethanol proponents argued that corn producers have continued to increase both yields and acreage to provide needed production for different demand sectors.

"There is no doubt that ethanol has contributed to higher costs for production of food," said Bruce Babcock, an Iowa State University economist, according to a report in the Des Moines Register. The article said Senate Ag Committee Chairman Tom Harkin (D-Iowa) was quick to respond by asking, “Aren't we missing a point here? What about the effects of increased production? A few years ago, the idea of producing 150 bushels of corn per acre would have been far-fetched. Now, we're doing it. More productivity by our farmers means greater supplies of corn for both food and fuel."

Dean Oestreich, chairman of Pioneer Hi-Bred, predicted an increase in corn production of at least 40 percent in the next decade, attributable to new seeds, technologies and farming techniques. "America's farmers and our agriculture industry have a long history of effectively meeting food and fuel needs," he said.

Harkin added, "That is a point that doesn't seem to be made very often these days."

Counterpoint. Michael Kelsey, executive vice president of the Nebraska Cattlemen, quoted in the Sioux City Journal, said, "We don't believe it's long-term good policy to mandate demand. We think demand should be consumer generated and not government generated."

Kelsey was critical of the Renewable Fuels Standard (RFS). "Mandating production and usage has never been good over the long term for any industry," Kelsey said, adding that mandated production "artificially sets a demand for the raw product that is unfair to other users."

"Ethanol from corn is an established technology, and demand should determine how much is produced, not the government," Kelsey added, according to The Grand Island Independent. "If the ethanol industry were required to compete for corn, as are all the other users, then the supply of corn would be allocated by market forces,” he concluded.

"I'll admit corn-based ethanol is not perfect," Sen. Ben Nelson (D-Neb.) said in prepared remarks, "but it's been blamed for practically every problem under the sun. What's next? Summer colds? Computer viruses? Bad hair days?”

Comments: The Senate Ag Committee -- or the Energy panels in Congress, or the Bush administration -- did not do any analysis of the potential implications of an increased RFS when the mandate was adjusted late in 2007 via legislation signed into law. So it should come as no surprise that the same "interested observers" would not seek or provide analysis even after the mandate was hiked.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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