Advocates deny link to spike in fuel prices - Trade Only Today

Advocates deny link to spike in fuel prices

Author:
Publish date:

Proponents of corn-based ethanol say corn and ethanol supplies are in good shape, and point to other causes for the increase in food prices.

They cite skyrocketing oil prices; droughts and adverse weather in Australia, China and other regions; increasing middle-class demand for grain in emerging economies; commodity speculation; and declining value of the dollar.

The total corn-based ethanol production accounts for only 3 percent of the 43 percent increase in global food prices over the last year, according to Ron Litterer, president of the National Corn Growers Association. And, he says, there is plenty of corn to go around.

“On June 30, the USDA released its quarterly grain stocks report and found that corn stocks are 14 percent higher than they were a year ago,” he said in an early-July webinar on the subject.

Litterer noted that a little more than 4 billion bushels of corn were in reserve as of June 1.

“When all is said and done, we’re hopeful about our 2008 crop,” he says. “Acres planted are the second-highest since 1946, and the harvest projection is the second-highest since 1944.”

Corn farmers harvested a record crop of 13.1 billion bushels in 2007, which boosted corn supplies available for use in 2008, according to Bob Dinneen, president of the Renewable Fuels Association, the trade group for ethanol producers. He says more than 1.4 billion bushels of corn — equivalent to 11 percent of the corn used for all purposes last year — were carried into this year.

“This carry-in will help ensure grain is available to corn users in the event of a short corn crop in 2008,” says Dinneen.

The Iowa Farm Bureau estimates 1.3 million acres of corn will be lost in Iowa because of flooding. Coupled with expected losses in Illinois, Wisconsin and Missouri, total corn acre losses could register in the range of two million to three million acres. This means 2008 corn plantings are likely to be in the 83 to 84 million acre range, Dinneen explains.

“It’s important that consumers realize there’s enough corn to supply food, feed and fuel needs in the United States, while meeting the needs of consumers around the world,” says Litterer.

Furthermore, he adds, “Technology is allowing growers to increase our yields each year to continue to meet these growing demands. We’ve not only had record exports, but have been able to provide a surplus.”

Litterer says better farming techniques also debunk the argument that more open space is being used for corn production to meet demand. He said farming acreage has been trending downward over the last few decades. In 1931, the year that corn saw the highest acreage count, all farmland under cultivation was 320.4 million acres; in 2007 total acreage under cultivation was an estimated 278.1 million.

The average yield, represented as bushels per acre, went from 26.5 in 1932 to an estimated 153 in 2007, and experts believe average yield can increase to 170 or more over the next decade, Litterer said.

Furthermore, technology improvements have made ethanol production more efficient. Throughout the last 20 years, the amount of energy needed to produce ethanol from corn has significantly decreased because of improved farming techniques, more efficient use of fertilizers and pesticides, higher-yielding crops, and more energy-efficient conversion technology, according to the Department of Energy.

“Improvements in ethanol efficiency will be a key component in meeting the demands of the market,” says Litterer from the Corn Growers Association. “New technologies will squeeze more ethanol out of a bushel of corn.”

He said the average ethanol conversion rate today is 2.8 gallons per bushel. That rate may soon increase to three gallons per bushel or higher because of emerging processing technologies, specifically corn fiber conversion and the adoption of ethanol-tailored seed hybrids.

This article originally appeared in the August 2008 issue.

Related

VIDEO: IBEX Interviews

Trade Only Today talks with Ron Huibers of Volvo Penta of the Americas, Huw Bower of the Brunswick Boat Group, Don Hopkins and Bill Szekesy of QMI Group, and Brad Burton of Albin Pump Marine LLC.