Tuesday, December 04, 2007

Ethanol Policy - What A Turkey

December 3, 2007

Ethanol subsidies are raising our food prices - dubbed the "Thanksgiving Tax" because it upped the cost we paid for Thanksgiving dinner.

Turkey farmers need almost three pounds of corn for every pound of meat put on the birds. But they must outbid those who buy up the corn to make ethanol, thanks to a 51-cents-per-gallon ethanol tax credit and other federal incentives.

America paid $69 million extra for our Thanksgiving turkeys due to ethanol mandates. That's what Joel Brandenberger of the National Turkey Federation told a Heritage Foundation audience. But it's just a small part of what he labeled the Thanksgiving Tax.

With almost a fourth of the corn crop now diverted to ethanol, it's costlier to feed the chickens, the hogs and the grain-fed cattle. Egg prices are up. Corn meal, corn syrup, and even my personal favorite (popcorn!) are pricier. So is almost all food, as other grains are in higher demand as a substitute for corn.

Bottom line: America pays $9 billion a year more for our food because of ethanol policy. The problem is growing faster than any crop. A recent U.S. Department of Agriculture report says farmers are planting more corn rather than other grains, constantly reducing the supply and thus raising the price for those crops. High grain costs are discouraging farmers from raising cattle and other animals, thus further increasing meat and egg prices. The food industry has a website outlining the ripple effect on our groceries.

That's the bad news. Now the worse news: Congress is about to mandate that we triple the use of ethanol. So take all these extra costs and multiply them by three or more.

Today's mandates already require gasoline sellers to blend in at least 5 billion gallons of ethanol a year. With a 51-cent-a-gallon subsidy, this costs taxpayers $4.5 billion on top of higher food prices. Congress plans to triple the mandate to 15 billion gallons a year. The House and Senate each have already agreed on that as part of their energy bill, but the legislation is still hung up in one of those Washington jaw-fests called a conference committee.

That gives us time to think this through and also to consider the other spin-offs from the ethanol mandate.

Environmentalists are starting to understand that more ethanol requires more corn, which requires more arable land. For example, Brazil is cutting down more rain forests to meet its national ethanol mandates. Incentives for other biofuels make the clear-cutting even worse, since cellulose plants like switch grass have less energy content than corn. They require eight times as many acres to produce equivalent amounts of energy. One estimate says the pending energy bill would require planting enough switch grass to cover the state of Ohio.

Fertilizing, harvesting and transporting such quantities to an ethanol distillery is also energy-intensive, dramatically reducing the supposed benefits to the environment.

There's a basic truth that cannot be altered - each drop of crude oil has an energy content that far surpasses the same amount of corn, switch grass or anything else. As Scotty always said to Captain Kirk, "Ye cannot repeal the laws of physics!" A gallon of ethanol can't take you as far as a gallon of gasoline because there's less power in it. Yet the current Congress won't agree to let America produce more oil from places like Alaska or from offshore - or let us build more refineries or nuclear powerplants

On the other hand, ethanol has a big and successful lobby. Having its champion state, Iowa, as the first place to hold a presidential contest also discourages contenders from picking a fight against ethanol.

As a Heritage Foundation study concluded, the costs of the ethanol mandate are substantial, while the benefits are small at best. We're paying the price with tax money, with higher fuel prices and with higher food prices.

Yes, corn is great chicken feed. But the cost of ethanol is not. This Thanksgiving Tax is nothing to be thankful for.

Ernest Istook is a distinguished fellow in Government Relations.

First appeared in World Net Daily

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Blogger The Localmalcontent said...

Agreed. This is a lamebraind idea to use a food crop as a gasoline alternative. There are better choices, one being hemp, of all things (then the hippies will
From the CIA's world factbook, I learn that America has enough friendly nations who export enough petroleum, which we could increase imports from, we could put such a cramp into Venezuela's economy, or into Irans; why we don't say 'C-ya' to them is beyond me.
Pursue our Alaskan fields, open the Gulf to oil exploration, and keep the corn on the cob, or for cornbread, or popcorn.

5:09 PM  
Blogger Red S Tater said...

Yup, ...and guess who the evirolib's will blame for higher food prices?

(hint- George Bush)

8:08 PM  
Blogger Red S Tater said...

(comment deleted)
belle, these sophomoric attacks won't get posted. Not sure what you're problem is or what your goal is, but if what you say is true about knowing Istook, then (as the old sayin' goes) with friends like you... he doesn't need enemies.

As a great thinker once said, "Like a Crow on a Junebug"

3:03 PM  
Anonymous Corn Farmer said...

All would be wise to check the "facts" in the story above. If we use the above numbers and knowledge of the corn markets the only way his numbers work is IF EVERY MAN WOMAN AND CHILD IN THE UNITED STATES CONSUMED OR THREW AWAY 1.9 POUNDS OF TURKEY ON THANKSGIVING DAY. If as he says 3 pounds of corn gives us 1 pound of Turkey and we know that corn went up 4 pennies per pound maximum from LOW TO HIGH IN THE LAST 16 MONTHS, the corn price increase would justify a 12 penny per pound increase in the turkey. So the real impact of corn prices on your Thanksgiving feast is how much you consumed times 12 pennies per pound. (1/4 pound = 3 cents) Anyone with knowledge of the markets would have to admit that the recent 4 penney per pound increase in corn prices is not entirely due to ethanol. There is a lot of export demand fueled by folks in other countries who desire and can afford better diets. The value of the US dollar makes US corn look cheap. ---------To all consumers. It will not be possible to have food prices of the past with energy prices of the future. The production, processing, and transportation of food takes energy. Also note that even with the current higher prices for corn, corn is a lower cost source of heat in many areas of the country than furnace oil or LP gas. This is one of the few times in history that this is true. If corn prices don't somewhat track energy prices, the best economic use for corn will be to burn raw corn.High priced energies will lead to higher priced food. The inflation in finished food products that can be justified with higher priced corn is actually modest. The 4 penny per pound increase in the price of corn makes a lot of food. Of course the writer above ignores the fact that about 5% on the nations gasoline supply is now ethanol. What do you think gasoline prices during the week of Thanksgiving would have been if we had had 5% less gasoline available?

9:44 AM  
Blogger Red S Tater said...

I thank you for your comments and for growing corn (if thats what you do) however you are wrong on several levels.

First, I probably threw away 5-lbs of Turkey in bones alone...as did you.
So much for that entire math lesson.

Second, there is no indication that there would have been ANY gas shortages without ethanol being sold this past thanksgiving or any other time.
There goes your final point about shortages.

Look, it takes more energy to PRODUCE ethanol that ethanol is capable of producing.

If you are truly concerned about "GAS PRICES" as you claim, you'll support drilling and refining petroleum in America and sell your corn to feed the starving instead of powering the "evil automobile" with it.

Thanks for playing.

11:18 AM  
Anonymous corn farmer said...

Mr tater, Hey thanks for posting my reply. Yes, I've been growing corn and soybeans for 33 years. You have to recognize that I was giving the ethanol hit man the benefit of the doubt accepting the 3 pounds of corn per 1 pound of meat. Feed conversions for turkey are actually much better but like you said you are also growing carcass that is not edible. Check your facts and I am betting that the numbers that they used in the article mean 1 pound of turkey as MEAT per 3 pounds of corn.---------The next time there is a supply scare in petroleum products do a little math and see how much the price rises and how much of the petroleum supply is actually disrupted. In recent months petroleum products and demand are in a very delicate balance. Any supply disruption seems to have a big effect on prices at the pump. ----- Yes it takes energy to produce ethanol but a majority of that energy comes from coal and natural gas. We actually get over 6 times the fluid fuel out of making corn into ethanol than the fluid fuel used in the entire chain to get the corn produced and to the ethanol refinery. There is a net energy gain measured in BTUs (35 to 55%)considering all energy sources from most studies with the exception of one done by Pimental. Of course Pimental is quoted more often than all of the others though one of his research partners disagrees with his conclusions and hence is soundly ignored. The big deal about ethanol from corn is actually the ability to multiply fluid fuels. Ethanol WHEN USED PROPERLY should be viewed as a fossil fuel extender that has environmental benefits. -------------------------Petroleum drilling and refining? Drill away. I believe it will take multiple pieces to solve our current energy needs puzzle. New petroleum resources are a key piece as is domestic ethanol. Most of the low cost easy to extract, easy to refine petroleum is already used. Hopefully with these higher prices we will have increased domestic petroleum resources that can come to the market. --------- Feed the starving? As an individual, I will continue to fund charities and support those who are making efforts to help the poor. As a businessman who will fail if I don't make a profit, I am committed to find the best sustainable economic use for the land that I farm or someone else will eventually take over. Asking me to grow corn for just food or feed is kinda like asking the oil guy to refine just heating oil so the poor won't freeze to death. If bio fuel bashers are successful in killing this industry at the same time we are faced with these high cost energies(as well as threats of supply disruptions from oil imports), we may find some of the poor burning corn to stay warm. Corn is now cheaper per BTU than heating oil.------------ Keep in mind that corn at historic highs was less than 10 pennies per pound. It is hard to cause DRAMATIC inflation in finished food prices with an ingredient this cheap. The price rise in corn in the last 15 months would justify price increases of- 4 pennies per pound of corn flakes, 4 pennies per pound of tortillas, 12 pennies per pound for turkeys, and 20 pennies per pound for retail pork. Any increase in costs of these products beyond this is not due to corn price changes. The reason for the corn price increase in the last 15 months is only partially due to ethanol demand.-------------Thank you for posting my reply above and for your comments. I am thinking that the truth is important to you and your readers. We aren't finding as much of that truth as I would have expected in press and from the likes of the Heritage Foundation. Non thinkin' think tank thinkers with non analyzin' analysts????????? I don't know how else you would explain the instances when they failed to use some grade school math to check their "facts". The Heritage Foundation linked to a Washington Post article last winter that suggested US ethanol had caused tortillas in Mexico to go up 32 to 64 pennies per pound. As I mentioned before the maximum increase in US corn prices during that timeframe was 4 pennies per pound. When you do complex analyzin' like that done at the HF, does 4 suddenly equal 32 to 64? As I mentioned before the reasons for the 4 penny per pound rise in the price of corn was only partially due to ethanol. Smart folks like those at the HF would have to know that wouldn't they?

9:24 PM  
Blogger Red S Tater said...

farmer, I appreciate your insight and comments and wish you only the very best.

While your vision of how ethanol is being sold to us is very moderate, it doesn't represent how ethanol is actually being presented to us.

We are being told that we must get off of fossil fuels and that growing corn (and grass) for ethanol will replace petroleum fuels.

Ethanol doesn't come close to performing as well as methanol or even gasoline in terms of HP and mileage.

I'm all for you selling as many bushels of corn and soybeans as humanly possible... but I can't support using it for an expensive inefficient fuel source.


9:50 PM  
Anonymous corn farmer said...

My vision is moderate due to the fact that I know a bit about ag and am learning a bit more all of the time about fossil fuels. The AGGRESSIVE goals that Washington is stating for bio fuels will not be 20% of the nations' fluid fuels supply for some time which means we still would need 80% from other sources. This debate is about -do we need more domestic fluid fuel sources? -Do we think that bio fuels can give us environmental benefits when used properly as a blend with gasoline? Do we want more US jobs producing energy for the US(oil and ethanol) and therefore more US cash circulating in the US? What are potential consequences/risks of not further developing domestic energy resources? ------------------------Automobiles have been tuned, retuned, and finetuned for over a century to get better fuel mileage and horsepower per gallon. We are just in the beginning stages of making that same progress with ethanol blends. PLEASE DO A SEARCH - ACE RESEARCH CONDUCTED BY THE UNIVERSITY OF NORTH DAKOTA ENERGY & ENVIRONMENTAL RESEARCH CENTER AND THE MINNESOTA CENTER FOR AUTOMOTIVE RESEARCH- FOR SOME VERY RECENT INFORMATION ON FUEL BLENDS AND FUEL MILEAGE IN NEW CARS. It appears that it would be in consumers best interest if we have blending pumps at our filling stations like Sunoco used in the 60s and 70s for octane choices. The choice at the filling station will allow the consumer to decide which blend he desires for his particular auto.

8:14 AM  
Blogger Red S Tater said...

You know a lot about growing corn... I know a lot about automobiles.

I won't tell you what to do with your corn... you don't tell me what to do with my cars.

Deal or No Deal.

I have no problem with someone OFFERING a CHOICE.... ethenol, biodiesel, crisco...whatever.
What I have a problem with... (and so should you) is ELIMINATING choices before any viable alternative has been developed and accepted.

How about we start working on an alternative for water since obviously we will run out one day?

Instant water... just add water.

9:02 AM  
Anonymous corn farmer said...

Well we agree that I will not be telling you what to do with your cars. We have a DEAL. The US Feds (EPA) and your state gvt may have something to say but that is between you and them and I wish you the best of luck.-----------------------------What choice have we eliminated in energies aside from MTBE? MTBE had a nasty habit, if spilled or leaked, in finding it's ways to groundwater supplies. If I remember correctly it is still legal to market MTBE in some areas but those that market it would be liable for spills and leakage. ---- Did you get a chance to review the new fuel mileage comparisons?-----------The water issues are a much different problem. We have populations growing in areas that don't have abundant water. Our problems aren't typically water shortages in the USA. Our problems are water management and distribution. Example-Farm country in the Mississippi basin delivers lots of water to the Mississippi for free. Population centers (both businesses and residents) seemed to ignore potential water supply issues when areas were developed and instead pursued desirable climates and new undeveloped areas. They now wonder why mother nature is failing to deliver an increasing supply of free/cheap water.--------------- As the cheap easy to refine oil disappears, this is similar to looking ever deeper for oil or using oil thats takes much more refining while citizens whine about the oil companies gouging us. -----------
Mr Tater thanks for your reply and keep on keepin' on. I looked at your favorite books list and will print one to look into them. If you want some well researched opinion on what the necessary building blocks for human society are(relatively cheap/abundant food and energy) and the risks that go with mismanaging natural resouces, I would recommend "Guns, Germs, and Steel" and "Collapse" to you. Both written by Jared Diamond. I don't agree with everything Jared says but he sure makes one think about our society, what made it possible, and some of the risks that go with our lifestyle and living patterns.

1:12 PM  
Blogger Red S Tater said...

Water wars aside, I support someone running their car on whatever they can manage to run it on... I'm strongly against replacing the best fuel ever found however in my car especially considering the fact that many scientists are disputing the "running out" theory and instead are abandoning the "plant juice" (or dinosaur juice depending on when you went to school) theory with a more common sense approach.
There is no evidence to show that OIL is not a renewable resourse and little to show that it comes from organic material at all.
Mysteriously oilfields have in fact replenished themselves and are producing where it was 'confirmed' to have been "running dry".

I'm just sayin'...

3:35 PM  
Blogger Corn Farmer said...

I am inviting those who find these replentishing pools of oil to pump them. It appears that even with a very significant increase in the price of oil, stocks are very tight. I am sure that the "low hanging fruit" is basically gone. The US has more oil rigs pumping right now than at any time in the past yet we reached our pumping peak years ago. Again the cheap large pools of easy to extract, easy to refine, oil appear to be few and far between. ----- The price of food (as well as many other things) will have to go up when oil does. Food production and transportation is energy intensive. If food prices don't adjust a bit to oil prices in the short term, food prices WILL adjust in the longer term due to less food being produced. The turkey guy and the Heritage Foundation should know this fact, they just prefer not to admit it.-- 100% ethanol was never proposed as the entire answer. Ethanol is a fluid gasoline extender that when used properly has environmental benefits, performance benefits, and may have cost benefits for some consumers in some areas of the country.
Actually these higher energy prices could be good for us if we moderate them, prevent price shocks, and prevent shortages. We need to rethink the way that we use all energy and conserve when it makes sense to do so. If the entire world consumed energy at the pace of the average US consumer--------------- weeeeeeellll it just can't be done very well with current resources and energy alternatives.

5:43 PM  
Blogger Red S Tater said...

Read my post on the origin of texas tea. I'm sure you'll have more than a comment or three... lol.

You said "We need to rethink the way that we use all energy and conserve when it makes sense to do so."

When you say "we" who are you talking about?

Just a few posts above, you told me that you are NOT for telling ME what to burn in my car, how/when/where etc.

It sounds like you've had a change of heart.

Exactly where do YOU want ME to "re-think" my energy consumption?

My home heating? Do YOU want to tell me where to set my thermostat now?

Where I go to work?

What I drive to get there?

What fuel I use to drive to get there?

Sorry, corn... you DO want to implement YOUR plan on everyone else, when the existing fuel source is actually doing just fine.

8:16 PM  
Anonymous corn farmer said...

Origin of Texas Tea? Yes I read it and liked the post. Buuuuuuuuttttt- I know of no major oil find in the world that does not peak in production after extracting for 10 to 20 years. Soooooo evidently the replentishing piece means that underground pools of oil are sometimes connected -or- some process is making oil faster than we were taught. It seems that wherever this new oil is coming from, it isn't happening as fast as we are consuming so we continue to consider tapping oil in higher cost places (Arctic, continental shelf, deeper, etc). From my point of view, we are not anywhere near being out of oil. We are out of most of the cheap, easy to extract, easy to refine oil. I want to avoid price shocks and shortages if I can.-------------------Ooops I didn't think that I was proposing national policy or mandating human behaviour, I thought I was suggesting alternatives that may be necessary when I said WE. I think that $200 per barrel oil is possible. I think that gas lines in the USA are possible. I believe that spiraling energy costs are a risk to our economy. I believe that our heavy reliance on imported oil makes us even more vulnerable. I believe that the rapid rate at which we have exported US $ to buy energy has weakened our economy. Our way of life has relied heavily on relatively abundant and relatively low cost energy and food. We will have both or we will have neither. Just because I believe the above does not make it so. Actually hope I am wrong about the risks to our way of life. Therefore I am in favor of carefully managing these risks to reduce them. I am hoping that any change in energy prices will be moderate enough that folks have a chance to react and choose for themselves.------------Fuel standards. You know I don't remember folks getting real irate about no lead gas being required. I also don't remember a big debate about mandated use of a gasoline oxygenate until the petroleum companies chose to pull their oxygenate from the market due to liability issues. Why is it such a big deal now??????? You know if this EPA stuff is ALL rubbish lets just return to burning more US coal with no air quality standards. I am being sarcastic of course.----------------------------Mr tater, I have enjoyed the discussion. THANK YOU. I like your blog and the lively, informative, exchange of information. I was taught that if you don't understand- ask- and if you disagree about the big stuff- speak up. I am always learning something by stating my opinion. Sometimes I learn that I was wrong and sometimes I just learn why others disagree. I am always learning. I think that we both love this country yet we probably disagree on the risks to our way of life that are due to higher priced energy supplies and our heavy reliance on imported energy.

6:44 PM  
Blogger Red S Tater said...

corn, we probably agree on more than we disagree! At least I like to think so until proven otherwise.

Stop by anytime and tell me where I'm wrong... you won't be the first or the last for sure.

God Bless ya' my friend,

8:08 PM  

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