U.S. Senator Cornyn on Ethanol

U.S. Senator John Cornyn has graciously provided the guest posting below.

Hello Panhandle Poet readers…it’s a privilege to guest post here.

I wanted to touch base with you regarding an issue which is very pressing in the Panhandle, ethanol.

When first introduced to the marketplace, it was hoped that ethanol would help revitalize rural America, lower the price we pay at the pump and reduce our dependence on foreign oil.

That’s a worthy goal, yet the government’s focus on ethanol has produced a problem. There have been unintended adverse consequences to our economy from the focus on ethanol production. Chiefly, since February of 2006 the combined price of corn, wheat and soybeans has increased more than 416 percent.

For this reason and many more, I co-sponsored legislation which was introduced recently to freeze the renewable fuel standard corn-based ethanol mandate at current 2008 levels.
In the panhandle, like other places, the effect of ethanol production has been mixed. While a few have benefitted from it, a great many others have suffered.

As more and more farmers grow corn for ethanol production, cattle feeding ration prices have shot sky high. Mandates, along with the high cost of fuel, are squeezing every bit of profit out of cattle feedlots today.

As consumers continue to see rising food and fuel prices, freezing the corn-based ethanol mandate will allow us to re-evaluate the consequences of using food for fuel and determine the best way forward. Texas will remain a leader as we work to diversify our nation’s energy supply to include alternative and renewable sources, but in the meantime Congress must exercise its oversight role to ensure there are no further unintended consequences. A freeze of the mandate will allow time for necessary assessments and reduce increasing grocery, grain and feed prices.

Last year, the Energy Independence and Security Act (EISA) provided the Environmental Protection Agency (EPA) the authority to waive the mandates, or adjust them as necessary to provide relief for consumers.

Last month, I joined Sen. Hutchison and others in sending a letter to EPA Administrator requesting an update on the pending rule-making process for the waiver of all or portions of the ethanol mandate passed by Congress in 2007. The letter also urged the EPA to consider the sharp rise in food prices as they review the mandate.

Freezing the mandate at its current level for one year is not a long term solution, but it is a good start towards finding one.

My heartfelt thanks go to the Senator for addressing this issue and for providing this post.

Also posted on:

Panhandle's Perspective
Common Sense Agriculture, Conservation and Energy

Ethanol's Tangled Web

The article below is one that I recently had published in our local paper. I have posted it on my Common Sense Agriculture, Conservation and Energy blog but not here. Several readers have mentioned to me that they are interested in ethanol and so I am re-posting the article here.

Direct subsidies by the U.S. government to gasoline blenders are $0.51/gallon of ethanol. In 2006, the total of these subsidies was $2.5 billion. Such subsidies are the reason behind the ethanol boom that we are experiencing. In 2006, ethanol production earned our country an approximately 1.5% oil independence. According to the USDA, at the maximum practical production level which is likely to be achieved by 2017, corn ethanol would provide 3.7% oil independence.

Ethanol has been around since the first “moonshiner” discovered how to distill corn into whiskey. It is the same thing as 200 proof whiskey. It was used by Henry Ford to power some of the first Model T’s. Today it is fueling a euphoric corn market that has seen prices soar above $3.50/bushel. It has also sent turmoil through the livestock markets as feeders adjust to the realities of higher commodity prices.

The USDA estimates that ethanol yields about 25% more energy than is required to produce it. Most of the energy gain is in the form of co-products available for feed. If you measure the energy equivalence of the ethanol itself, it takes about as much energy to produce it as it yields. One gallon of ethanol contains about 2/3 of the energy of a gallon of gasoline. This means that if your vehicle achieved 30 mpg with gasoline, it would achieve only 20 mpg burning pure ethanol.

Ethanol co-products make excellent cattle feed for inclusion in feedlot rations. Some studies indicate that Wet Distiller’s Grains contain 100-112% of the value of dry rolled corn. Dry Distiller’s Grains however are only about 88% of the feed value of dry rolled corn. In the larger feedlots that primarily utilize steam-flaked corn, the comparative feed value is much lower. That is why the cost of the co-products will be one of the primary determining factors driving its use as a substitution for feeding corn in livestock rations.

One of the most controversial issues surrounding the production of ethanol from corn revolves around concerns over the impact to food prices. Most of the corn produced in the United States is utilized as animal feed. Rising corn prices have already had a significant impact on the cost of feeding livestock.

Most planting decisions are at least somewhat based on relative commodity prices of various crops that are feasible for planting in a particular area. In areas where corn is a viable alternative, significant crop acreage is being shifted to corn production at the expense of other crops. The effect is to lift commodity prices for all crops that are being replaced by corn production. Again, the primary impact will be on crops that are destined for animal feed, such as soybeans and other grains.

As ethanol production capacity increases, the pressure on substituting ethanol fuel crops for other commodities will increase. The result will certainly be upward pressure on the prices of food crops due to the scarcity impact on supply and demand.

Should we be concerned? The U.S. consumer pays a smaller percentage of his income for food (less than 10%) than consumers in any other part of the world (20 – 50% for middle income countries). In countries that struggle at a subsistence level of farming, there will be pressure to divert land utilization for ethanol fuel production. The impact on such economies will depend on government policies related to land ownership and control of production. In some instances, it could help to lift economies above subsistence level by creating the opportunity for higher revenue crops.

Ethanol is only a tiny piece of the energy puzzle. It is a tiny piece that is creating turmoil across the globe in the agricultural sector. Turmoil generally creates opportunities for some and failure for those who do not adapt to changes in the marketplace. It is hoped that new technologies for producing ethanol from plant fibers rather than highly concentrated energy sources such as corn will transform ethanol production in the near future. In the meantime, we can expect commodity prices to remain high which will hopefully be a boon to our rural economy.

Related articles:

http://agriconenergy.blogspot.com/2007/09/sweet-sorghum-ethanol.html

http://agriconenergy.blogspot.com/2007/09/energy-vs-food-ii.html

http://agriconenergy.blogspot.com/2007/09/grants-for-biomass-energy-research.html

http://agriconenergy.blogspot.com/2007/09/bio-fuels-research-will-have-many.html

http://agriconenergy.blogspot.com/2007/09/advanced-biofuels-research.html

http://agriconenergy.blogspot.com/2007/09/georgia-tech-biofuels-research.html

http://agriconenergy.blogspot.com/2007/10/microbes-for-hydrogen-production.html

http://agriconenergy.blogspot.com/2007/11/food-vs-fuel-debate-another-round.html

http://agriconenergy.blogspot.com/2007/11/ethanol-environmental-manual.html

Random Observations

The official temperature today was 101.

The forecast was for 97.

My thermometer showed 104 at 3:00 pm.

Hurricane Dean is bearing down on the Yucatan peninsula.

It was earlier projected to possibly hit Texas.

We sent buses from the Panhandle to San Antonio in preparation.

The grass in Central Texas is so lush

That the cattle can't eat enough

To get enough to eat (because of the high water content).

The speculation about ethanol production

Has pushed the price of corn so high

The ethanol plants are losing money.

Some liberal activist has filed a complaint

Against Fred Thompson for campaign violations

And he isn't yet a declared candidate.

Obesity may be catching.

Dogs and cats are overweight.

Children are starving around the world.

Beam me up Scottie!

Chance Conversations on Energy

Often while traveling I run into other salesmen that I have met through the years. It is interesting how we often end up in the same places. The cattle industry is worldwide and yet fairly small in the number of people that are involved in it. Those companies that serve the cattle industry are few. Anywhere that cattle are concentrated, you tend to run into the same people. The advantage is that you occasionally have company for dinner that otherwise would be eaten alone.

Tonight I was visiting with an acquaintance from Colorado who happened to be eating in the same place that I was. We talked about all of the wind generation fields that are going in throughout the plains. For both of us it seemed that no matter where we travelled, we saw wind generators being installed. We both agreed that it was a good thing. We also were both in agreement that there are a lot of ethanol plants being built and they are not necessarily a good thing.

I think biofuel plants should be limited to converting human waste and garbage to fuel. They should not be converting plant mass to fuel. Ethanol production is a losing proposition for the taxpayers of this country. Converting crop acres to corn production that will be used for ethanol only drives up food prices. It is not an efficient use of our land resources. Ethanol production continues to be subsidized. It should not be. Spend the subsidies to develop technologies for converting garbage and human waste to fuel. Spend the subsidies to develop efficient solar and wind technologies. Lets develop nuclear fuel generation plants and fuel cells. Quit wasting our tax money on ethanol. It doesn't really help us.

Ice Cream and Ethanol

OK ice cream lovers. It's time to rebel!!!


Ice-cream makers frozen out as corn price rises

From The Times
July 16, 2007

Suzy Jagger and Carl Mortished

What’s the connection between ethanol, the biofuel produced from corn, and a cherry vanilla ice-cream?
Answer: the first is responsible for pushing up the price of the other.

This month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol.

Christina Seid, whose family have been making ice-cream at the Chinatown Ice Cream Factory for 28 years, said yesterday that she expected to have to raise her prices, along with all competitors in the short term. “We are holding out as long as we can, but prices will rise,” Ms Seid said.

Amy Green’s Ivanna Cone ice-cream emporium in Lincoln, Nebraska, has already raised its prices for a small cone to $3.50 before tax, up from $2.95 a few months ago. She also estimates that she is paying $150 more a week for the butterfat that she uses in her ice-cream.

The squeeze on ice-cream makers, chocolate manufacturers and pizza companies – all of whom use dairy produce as a raw material – is set to tighten as the price of a gallon of milk in the US – up 55 per cent in the past 12 months in some American states – is now the same as a gallon of petrol, with dairy prices accelerating faster than the cost of fuel.

Prices for dairy products have also risen because of increasing demand from China and the Middle East along with the drought in Australia, reduced subsidies in the European Union and the rocketing cost of corn.

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I don't know about you, but I think that when the ethanol boondoggle starts affecting the price of ice cream they've gone too far!!

The Ethanol Impact

I've been saying for some time now that ethanol production in its current form is going to have serious detrimental repercussions on the consumer's food dollar. The following article indicates that the pinch is already showing itself.


Fed Oversight? Inflation Seems To Be Eating Out

Before Federal Reserve policy makers meet to decide what to do with interest rates next week, they should visit a local eatery. They'll find something unappetizing: higher prices and fewer diners. Casual-dining restaurants are getting hit by rising inflation. Corn prices have surged due to demand for corn-based ethanol.

Because corn is a big feedstock, it's trickling into the cost of everything from chicken to cheese. Wholesale butter, cream and milk prices have jumped about 20% in the past three months, according to Raymond James. Cheesecake Factory's stock tumbled 7.1% yesterday after.... (complete article here)

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As the impact on food expenditures increases, we will begin to see a secondary impact in the housing market. Many people today have interest only mortgage payments betting on rising real estate prices to create equity. As more disposable income goes to food, fewer dollars will be available for housing. The bubble will burst and mortgage companies will end up with empty houses that are worth less than the loan against them. It won't be pretty. It will make the S&L fiasco of the 80's look like a picnic.

More on Ethanol

This article from CattleNetwork.com is interesting (at least to those of us who seem to be obsessed with Ethanol)....

The Efficiency of Ethanol Production

The efficiency of ethanol productionhas long been questioned. Critics would argue that the industry could not survive without government subsidies and that it takes more energy to produce a unit of ethanol than the energy derived from the ethanol. There might have been some merit to these arguments, given the technology that existed at the time, both in terms of agronomic practices and the processes for turning feedstocks into fuel ethanol.
However, a study published in July 2006 by the University of Minnesota concluded that there is a net energy gain with the production of ethanol from corn. Researchers tracked the amount of energy used to grow corn and to turn it into ethanol, and they factored in the cost of transporting the raw product to the plant.
Researchers also factored in the cost of how much fertilizer and pesticides were required to grow the corn, and the greenhouse gases, nitrogen, phosphorus, and pesticide pollutants that were released into the environment. They concluded that corn-based ethanol yielded 25% more energy than was expended in producing that unit of ethanol.
The cost of producing ethanol varies with the feedstock being used and its availability. In the U.S. and Canada, corn is the most widely used feedstock because it is generally the cheapest, both in terms of the cost of feedstock and the processing costs. In Brazil, sugar cane is the most cost effective feedstock, despite the relatively low ethanol conversion factor. The low cost of sugar cane and the associated processing costs make Brazil’s ethanol producers very competitive in the world ethanol market.
Processing costs, for corn-based ethanol production, depend on the type of milling process. For very large plants, the economics of production favour the wet milling process, despite a lower conversion rate than the dry milling process and higher processing costs per gallon.
The value of by-products derived from wet milling more than offsets the lower conversion rate and higher processing costs, resulting in the lower cost per gallon of ethanol. The by-products of the wet milling process are normally corn oil, corn gluten meal, corn gluten feed, and carbon dioxide, but some larger plants have developed the ability to also produce vitamins, food and feed additives from the same feedstock, by-products which help to reduce the cost per gallon of ethanol.
Dry milling accounts for most of the ethanol produced in the U.S., and the main by-products of this process are distillers dried grain with soluble (DDGS), condensed syrup, and carbon dioxide. DDGS is a high-protein feed ingredient, but it is low in amino acids, including lysine.
The low levels of lysine limit the usefulness of DDGS in hog and poultry rations. However, the abundance of DDGS in the U.S Midwest, where ethanol plants are concentrated, allows nutritionists to incorporate this relatively low cost feed ingredient into feed rations, provided that the customers for the DDGS are within a certain radius of the ethanol plants.
Currently, the U.S. ethanol industry appears to be less dependent on government subsidies than in the past. That move to self-sufficiency can be attributed to several factors, including record high prices for crude oil. High crude oil prices and the market price of ethanol have made its production much more profitable. In fact, ethanol production might be profitable enough to allow producers to operate without the US$0.50/gal subsidy they currently receive from the U.S. government.

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Obviously the profitability of ethanol is dependent on the relative price of gasoline. The subsidy for production probably is just an offset against reduced farm subsidy payments due to increased corn prices in the market so it isn't a real loss to the taxpayer, however, I'd like to see our "all wise and powerful government" end this subsidy for ethanol and let the market take its course.

Robots and Ethanol

I thought this to be an interesting article on Ethanol. The ARS is searching for ways to make ethanol production more efficient. They need to.....


Robot, Yeast Combo May Mean More Ethanol

Scientists with the Agricultural Research Service (ARS) in Peoria, Ill., are excited about the latest member to join their team: a one-armed robot. They expect it to speed studies aimed at harnessing the power of proteins for industrial uses, such as making fuel ethanol from fibrous corn stover. The robot is the centerpiece of an automated system called the "plasmid-based functional proteomics work cell." According to Stephen Hughes, a molecular biologist with the ARS National Center for Agricultural Utilization Research in Peoria, the system is the first of its kind to fully automate several procedures that have traditionally been carried out by hand--human hand, that is. A short list of functions includes extracting genetic material from the cells of plants, microbes and other organisms; making DNA copies of genes; inserting the copies into Escherichia coli; culturing these bacteria so that the copies can be sequenced and their proteins identified; and inserting desirable genes into yeasts used to make ethanol. Thanks to the fast, precise movements of its mechanized arm, the robotic system can carry out such tasks hundreds--or even thousands--of times faster than a human could, notes Hughes. He and colleagues in the ARS center's Bioproducts and Biocatalysis Research Unit codeveloped the system with a team from Hudson Control Group of Springfield, N.J., starting in 2004. Of particular interest is using the robotic system to genetically modify new strains of Saccharomyces yeast that can metabolize sugars locked up within corn fiber--something these microbial workhorses have so far failed to do. Currently, only the starch from corn and other grain crops is being converted commercially into the sugars from which ethanol is derived. With the Saccharomyces yeasts now used, this equates to nearly three gallons of ethanol from a bushel of corn. Using new strains capable of breaking down corn fiber could potentially squeeze 10 percent more ethanol from the grain, Hughes and colleagues estimate. Read more about this and other ARS bioenergy research in the April 2007 issue of Agricultural Research magazine, available online at: http://www.ars.usda.gov/is/AR/archive/apr07/robot0407.htm ARS is the U.S. Department of Agriculture's chief scientific research agency.

Source: Jan Suszkiw, ARS News Service

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I think there is definitely a place for ethanol in the alternative fuels debate. I would just like to see it made from recycling scrap organics, or from fibrous plant residues that can be harvested from marginally productive land rather than from corn. Until the switch occurs, the negative impact to food prices, and the inefficient ethanol production methods will cost the consumers more than the benefits.

Some New Links Added

Since I find myself repeatedly writing about climate change, alternative energy sources, ethanol, the weather, etc. I've added a few Links in my Links list. There's some interesting reading there if you have time to wade through it all.

Ethanol -- Why???

The traffic volume on the highways throughout the Panhandle seems to be increasing. That's a good sign. It is a sign of a thriving economy.

I have been seeing a lot of trucks on the highways carrying what appears to be capital equipment and machinery. I have recently seen parts for the giant wind generators, many large storage tanks, motors, fan assemblies, valves, etc. Almost all of the pieces destined to either wind generator fields or to ethanol plants.

I really struggle with the ethanol plants -- especially in corn growing areas that rely on the Ogallala Aquifer for sufficient water to grow the corn. Think for a minute about what it takes to grow corn in the Texas Panhandle where our rainfall is approximately 20 inches per year, or less. The fields are prepared by tractors fueled by diesel, the primary nitrogen fertilizer (anhydrous ammonia) requires huge amounts of natural gas to manufacture, the water is pumped from an aquifer that lies several hundred feet below the surface and therefore requires energy to lift the water. Usually the irrigation pumps are powered by electricity, the bulk of which continues to be generated at plants fueled by natural gas. Once the corn is ready for harvest, the combines that shell it, and the trucks that take it to the ethanol plants are fueled by diesel. I have heard it said that we spend approximately $0.98 worth of fossil fuel to produce $1.00 worth of ethanol. It just doesn't make sense to me.

The one area of benefit that I see, is that the ethanol plants are a source of jobs in many smaller rural communities. I think that's great in the short run, but what will happen in the longer term? Will those jobs still be there in 10 years? Or, will they dry up with the demise of ethanol.

One argument says that this is a transitional time for ethanol. Eventually we will shift to a cellulosic basis for production rather than using corn. I think that's great, but will that reduce the amount of fossil fuel used to produce it? I doubt it.

Another problem with using corn, or any other crop for that matter, for making ethanol is that it is causing a shift in acreage from other crops to corn production. This does several things. 1) It increases the amount of fertilizer used which adds to potential runoff issues. 2) Corn demands a much larger amount of water for production than most other crops raised on the High Plains, further stressing the already significantly depleted water supply. 3) The acreage shift to corn from other crops drives up the price of all crop-based commodities. This may be good in the short-run for the farmers. But, it will eventually be reflected in one of two ways. Either our food and fiber costs will increase at the consumer level, or we will end up purchasing more from other countries.

If our strategy in developing ethanol as an alternative fuel is to decrease our reliance on other countries, it won't work. It will just shift the reliance from a minuscule percentage of our fuel demands to a significant percentage of our food and fiber demands.

Increasing crop prices may have the short-term positive effect of increasing farm income from the marketplace to offset government subsidies. This would be a positive benefit to the taxpayers of the nation if the Congress would just not spend that money on something else. We all know how that will turn out.

Currently there are significant government subsidies to incent the creation of ethanol capacity in our country. Some of the subsidies are direct and some are related to the investment of funds in alternative energy production in lieu of taxing those funds derived from other means. Either way, it is dollars out of the taxpayers pocket. I would much rather see that money spent on projects such as the windmill generators, or geothermal, or nuclear energy. The problem is, ethanol plants seem to generate more votes because of the "pork-barrel" nature of the projects.

It would be nice if Congress would vote for sensible legislation rather than their behavior being totally dictated by what will get them the most votes, or line their pockets the quickest. I think we need to fire them all and start over.

Sunshine

As I drive around the Panhandle, there is a lot of optimism. There are ethanol plants being built and dairies going in. Houses are springing up around Amarillo like a new corn crop in June. Farmers are excited about the new markets for their crops -- especially corn for making ethanol. The recent moisture even has the cattlemen optimistic about the pasture this spring. When we get a little warmth, the wheat pasture will shoot up overnight and the spring grasses won't be far behind.

You can tell the sun is shining today by the tone of this post. The temperature shot from zero to nearly thirty in about five hours! The snow is melting and people are moving about again.

Isn't it amazing what the sunshine can do for your mood? When you're stuck inside because of the weather -- or if you're working out in it -- you are quickly worn down. But, when the sun comes out and the birds start singing, life seems suddenly much better. I wonder what that tells us about human nature.

When we walk in the darkness, it is as though we carry a weight on our shoulders. When we step into the light, that load is lifted from us. We all need a regular dose of light. "I am the light of the world. Whoever follows me will never walk in darkness, but will have the light of life." John 8:12