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Drought could lead to end of federal ethanol mandate
A field of dead corn sits next to the Lincolnland Agri-Energy ethanol plant July 25, 2012 in Palestine, Ill.
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Jeremy Hobson: As the worst drought in 50 years continues to send grain prices through the roof, several governors are asking the federal government to end a mandate that requires some of the nation's corn to be used for ethanol.
Marketplace economics correspondent Chris Farrell joins us now to discuss. Good morning.
Chris Farrell: Good morning, Jeremy.
Hobson: Chris, first of all, remind us exactly what this federal ethanol mandate is all about.
Farrell: Right. It's a federal mandate, a federal requirement that of gasoline sold in the U.S., it contain roughly 9 percent of it is ethanol. And you know Jeremy, it was created by politics as mandate -- no surprise there I guess. But it was to reduce our dependence on foreign sources of crude oil. Global climate change, a lot of concerns about that. And then, as a way to boost rural communities.
Hobson: So those sound like pretty noble objectives. What's the problem?
Farrell: The problem is, we have a drought. We have real problems with the corn crop and the skyrocketing price of food. So much so that now we're talking about a global food crisis. Well, most ethanol in this country is corn-based, and roughly 40 percent of the crop is going to the biofuels industry. And there are increasing calls to suspend the mandate at this time because you know, it's just not good having corn going into cars rather into the food chain.
Hobson: So basically, if you took away this mandate, farmers would be less inclined to sell their corn to the biofuels industry, and therefore they would be putting more of it into our food supply, which would bring down prices?
Farrell: That's right. That's the economics of it, that's the belief it would at least reduce the demand for the biofuels industry. And I think the politics, Jeremy, are leaning toward suspension. I mean, there's a lot of concern about global food crisis, G20 talking about having a meeting. You have the cattle industry and other industries are calling for suspension. Bipartisan groups, senators, a couple of governors. So I think this time, a mandate created by politics will be suspended by politics.
Hobson: Marketplace economics correspondent Chris Farrell. Thanks a lot.
Farrell: Thank you.
Namsmog you unwittingly reveal an error in judgement with the comment "Corn for food, feed, or booze, but not fuel!". Food and feed are fuel. Calories consumed by animals are just as much fuel as those consumed by machinery. It is the design revolution that gave us farm machinery that led to the great increases in farm productivity. That productivity requires fuel, we can either use the bountiful solar insolation received by the planet and it's lovely natural systems of conversion to usable energy for us and our fellow animals and with a little nudge for machine or we can devastate these natural systems by accessing and consuming ancient stores of solar energy. It is an abomination that such a great plant as corn has been turned into such a boondoggle, I say again if people want change, change the farm bill and stop skewing the market; otherwise at least let there be some mitigation of the damage done.
Ceasing the RFS for ethanol in gasoline ain't gonna happen. The RFA has lined too many (bipartisan) Midwest politicos' pockets with $$$. Besides, they're out to lunch, literally (congressional recess) and figuratively. Corn for food, feed, or booze, but not fuel!
Regular listener and supporter!
I think it's crucial to note that the 40% statistic being repeated everywhere is inaccurate. As rwatt mentions above, the ethanol refining process removes the starch from the kernel. What's left (from 1/3 to 1/2 of the original mass) contains nutritional value (protein, fats, fiber, etc.) in the form of "distiller's grains" which is marketed as a feed product and used widely for cows, pigs, poultry and aquaculture. This means the actual mass consumption of corn by the ethanol industry is much lower than 40%.
Some argue that distiller's grains are closer to a natural diet for ruminants than unprocessed corn, because cows and pigs actually have a hard time digesting the starch in corn. I've even heard (can't find a source) that more feed-able distillers grain is produced annually than the amount of field corn eaten by beef cattle in the U.S.
Also, many people don't realize that most corn planted is "field corn", not "sweet corn".
One more thing: Cows and pigs are terrible converters of energy. If we were super concerned about the food supply we would produce crops other than corn which humans could eat directly, rather than dumping them into large animals which convert only about 3% of the energy content in corn into consumable meat.
What Farrell and Hobson advocate here (yes they are advocating) is the eradication of the one effort to make the corn economy sustainable. Government and agribusiness interests foisted the ridiculous unsustainable corn economy on consumers and producers. There was one bright spot however, in that you can extract the solar energy stored in the corn kernel and use it as fuel. The corn american farmers produce does not go into corn flakes and tortilla chips, it mainly goes into the gut of cattle. Cattle cannot digest starch so it goes to waste-literally, right out their rear end undigested. So, instead of wasting this it is possible to pre-process the corn and remove the offending starch-and make fuel with it, Ethanol! The mash that is left over after ethanol is distilled (distillers grains) is a much better feed and cattle gain weight faster consuming the distillers grains than they did with the whole corn which makes sense since it is better for them than eating things they can't digest. Now, if Farrell and Hobson want to talk about moving away from a monocrop farm economy and on to sustainable food production in this country, I'm all for it, and ethanol will fit nicely into that as well. Ethanol is amenable to small scale distributed production using a variety of feedstocks from cattails to sugar beets to sorghum to mesquite tree pods and many waste products. In each case it fits into an ecological scheme of cycling remnants of one process into another which is how nature works. The real economics of this is that without ethanol there will be less competition for petroleum fuels (which is really the objective, the whole ethanol misinformation campaign comes from petroleum interests) and gas prices will rise at a greater rate.
