July 31, 2008

Will lower corn prices mean lower food prices?

That's a question posed today by the Nebraska Corn Board. It asked the question because corn prices have fallen about 25 percent over the last month. Since the Grocery Gang blamed higher corn costs for its rising prices, now that corn prices have come down some, will the Grocery Gang lower its prices, too?

Said Don Hutchens, executive director of the Nebraska Corn Board: We believe the answer is no, they won't lower prices a penny. The reason is what we've said all along, that the main driver in higher food prices is high oil prices.

The news release (click here to view) points out that it takes 21 cents worth of diesel to deliver a single box of corn flakes to the store shelf. The cost of corn in that same box? Less than 7 cents. “It's pretty easy to see how fuel and energy costs impact food price," Hutchens said.

Kraft Foods, one of the players in the Grocery Gang's efforts to blame higher food prices on corn farmers, reported quarterly profits this week of $879 million, up 10 percent from last year. Unlike corn growers, who have to take the price offered by the market, food companies, it seems, are pretty good at passing long their higher fuel and energy costs.

UPDATE: Here's a good article from the Grand Island Independent on this subject.

Would you like to make $90,000 a minute?

Here's how: Sell oil and gas.

Don't believe it can be done? Exxon did it in its second quarter this year.

That $90,000 a minute translates to $11.68 billion in profits, an increase of 14 percent from last year's second quarter. It also sets a new earnings record for a single quarter for any American company. And yes, that means Exxon broke it's own record.

This article in the New York Times sums up Exxon, the world's largest publicly traded oil company, and other oil companies' profits. Like Shell's $11.56 billion.

Here's a good line: Record earnings for the world’s largest publicly traded oil company have become almost as predictable as the surge of gasoline prices at the pump in recent years.

And we still have to debate what's really behind higher food costs?

Report: Energy costs, foreign oil behind food costs

The production of ethanol from corn has had minimal impact on consumer food prices while reducing fuel costs to consumers across the country, according to a report released today.

Senator Ben Nelson (D-Neb.), chairman of the Ethanol Across America education campaign, hailed a new issue brief titled, The Impact of Ethanol Production on Food, Feed and Fuel, as a calm voice in a debate that has become confused due to misinformation. Here's a news release.

“While there is new demand for corn and other agricultural products resulting from our effort to produce biofuels, we are seeing increased yields and a likely leveling of prices. We are also working hard to diversify our biofuel production by utilizing new feedstocks that range from specialty energy crops to waste materials,” Nelson said.

He added: I think we are losing sight of the big picture and our pressing needs of producing our own energy, reducing greenhouse gases, creating jobs across the U.S., and revitalizing rural America. Through the ethanol program, we are not only producing ethanol and animal protein from corn, but the same process can provide food fit for human consumption as well. Corn ethanol is one step towards energy independence and it is a step that benefits all consumers.

For a copy of the report, click here.

Senate ethanol meeting slated for Omaha

Sen. Ben Nelson (D-Neb.) said yesterday that the Senate Agriculture Committee will hold a hearing in Omaha August 18 to discuss ethanol's affect on corn and food prices. Nelson is a member of the committee.

During a call with reporters, Nelson said ethanol has unfairly been demonized by grocery associations and others as the main cause for higher food prices and higher corn prices.

The Omaha World Herald reported that Nelson said committee chairman, Sen. Tom Harkin (D-Iowa), agreed to hold the hearing in the face of what Nelson called an ongoing "smear campaign" against ethanol. Harkin plans to attend.

The list of witnesses has yet to be determined.

July 30, 2008

A plea for market convergence

The Commodity Futures Trading Commission’s Agricultural Advisory Committee was told yesterday that it needs to quickly address the lack of convergence between ag commodity futures and cash prices.

According to this Dow Jones story, two potential solutions discussed by panel members included a proposal to significantly increase premium charges for grain storage and a proposal for a quicker "compelled load-out," which would allow a warehouse certificate holder to force an elevator to deliver physical commodities in as little as 48 hours.

Advance Trading’s Terry Reinhart told the panel that doubling premium charges would assure convergence. CME’s Dave Lehman said a rate increase for storage is being tried under advisement by the National Grain and Feed Association, but so far the results have been disappointing.

He said CME will also try implementing new seasonal storage rates and setting up additional delivery locations.

Brownfield’s Peter Shinn, in this report, noted that with the sharp run-up in ag commodity prices this year, convergence didn't happen for wheat and cotton some months. And that made the hedges of commercial market players worthless.

This reminds me of a Congressional hearing in June where the discussion centered on CFTC and oil markets. One person who testified said futures markets were turning into "gambling casinos". Check out that post.

July 29, 2008

CornsTALK: Charging ahead with the truth

The headline on the 2008 summer edition of the Nebraska Corn Board's CornsTALK publication says it all: Charging ahead with the truth on food and fuel.

Veritas -- the word below the corn kernel in the farmer's flag -- means truth in Latin. And in this issue of CornsTALK, that's exactly what is discussed -- efforts by the Nebraska Corn Board, National Corn Growers Association and others to spread the truth on the food and fuel issue.

In addition to discussing the anti-ethanol campaign led by the Grocery Gang, a number of facts are presented, including a few Kernels of Truth.

To download a .pdf of the quarterly newsletter, click here.

USDA says 'no' to penalty-free CRP opt-outs

Secretary of Agriculture Ed Schafer announced today that USDA will not allow penalty-free opt-outs this year for acres currently enrolled in the Conservation Reserve Program (CRP).

"We believe the decision that we are announcing today strikes best balance between supporting programs to protect natural resources and meeting the demands for grain production," Schafer said.

Schafer said record-high corn prices have retreated 25%, while soybean prices dropped 14%. He added that this year's floods may have had less of an impact than originally believed, and crop conditions continue to improve, with the latest conditions above the five-year average.

Even without penalty-free opt-outs, Schafer said the 2008 farm bill will lead to a smaller CRP. The farm bill lowers the cap on CRP acres, he said, from 39.2 to 32.0 million. That means the 34.7 million acres enrolled now will shrink. In September this year, 1.1 million acres expire, followed by 3.8 million in 2009 and 4.4 million in 2010. Of course some of those acres will be re-enrolled, but others will likely enter into production.

July 28, 2008

Crop report: Corn looking even better

Here's a link to this week's crop progress report.

The highlights:

76 percent of Nebraska's crop is in good to excellent condition, up a point from last week; 18 percent is in fair condition and 6 percent is poor to very poor.

Nationally, 66 percent of the crop is in good to excellent condition, up a point from last week; 24 percent is fair and 10 is poor to very poor. Last year, 58 percent was good to excellent, 26 was fair and 16 percent poor to very poor. So...the crop that's in the ground is in good shape.

The overall crop is still behind, though, as the percent of crop silking and in dough stage lags the five-year average.

Oil: A clear and present danger

An opinion article appeared on the Wall Street Journal webpage today - it is authored by Robert McFarlane, who served as President Ronald Reagan's national security adviser, and George Philippidis, who is energy director at Florida International University in Miami.

In the article -- view it here -- the authors say the escalation in oil and food prices is a "clear and present danger to our economy and national security" and that the root cause of the crisis is "our dependence on a single commodity, oil, for transportation -- we burn 145 billion gallons of gasoline a year."

Here's a good comment:

The public has been bombarded with lies and half-truths about biofuels, especially in the last six months. Americans should realize that biofuels are superior to fossil fuels. Biofuels are renewable, nontoxic and biodegradable. They are also beneficial to the automobile engine, the environment and the economy.

And another:

Energy security can not be achieved with a silver bullet. It is not a competition between corn ethanol and sugarcane ethanol or between biofuels and plug-in hybrids. The sooner we realize that U.S. energy security needs all of the above, the sooner our country will be able to commit to a coherent long-term energy policy.

Besides pushing for more flex-fuel vehicles, McFarlane and Philippidis argue that biofuels from Latin America should become an integral part of U.S. energy strategy. Although corn growers and U.S. ethanol producers may not agree with some of their ideas along those lines, their take on the importance of ethanol to diversifying our fuel supplies is spot on.

Senators get meeting with EPA

A group of Senators, including Sen. Ben Nelson (D-Neb.), met with Environmental Protection Agency administrator late last week -- following up on a letter they sent him expressing their frustration that Johnson had met privately with Texas Gov. Rick Perry. The Texas governor is behind the Renewable Fuels Standard (RFS) waiver request.

Sen. Chuck Grassley (R-Iowa) told DTN's Chris Claytin that Johnson "made clear to us he did not have any agreement with Perry to delay the decision." (The decision was delayed until sometime in August.)

Grassley said also said: "We talked a little bit about the burden the Perry petition had to overcome and I don't think he disagreed with that."

For the full DTN story, click here.

July 25, 2008

News: cheap gas, cheaper bread, WDGS and more

Instead of four different blog posts today - here's one linking to some good articles:

From The Hill - Gas cheaper because of ethanol
Ethanol is keeping gas prices as much as 40 cents cheaper, according to Sen. Tom Harkin (D-Iowa), one of the Senate’s top supporters of corn-based renewable fuels.

From InsideAg - Give us our cheaper bread
In his blog, Successful Farming's John Walter discusses lower corn (and oil) prices. And asks: Where is the point where prices break for a loaf of bread or a tank of gas? Be sure to check out the corn future chart he pasted in.

From Nebraska Farmer - Research Geared to Easy Storage of WDGS
The goal is to expand storage options and perfect feeding with low quality forages, which will twice as many cattle to be in the same pasture without damaging range health. (For more on WDGS, click here.)

From Kansas City InfoZine - Ethanol: Good News for Kansas
Kansas Lieutenant Governor Mark Parkinson writes that Ethanol is here to stay and this is good news for all of us.

From USA Today - Best ideas are ideology-free
Conservative columnist Cal Thomas and liberal Democratic strategist Bob Beckel agree with T. Boone Pickens: We need to do something about foreign oil.

From USA Today - Ethanol offsets oil prices
Bob Dinneen reminds us that without biofuels, we’d be paying even more for gasoline.

More ethanol education needed

Have you seen a “No Corn in Our Gas” sign lately? Or one asking, “Why Do You Put Alcohol in Your Tank?” Or maybe a gas station promoting “100% Gas”?

Although more common in the late 1970s or early '80s when oil companies funded campaigns against gasohol - their very tiny competition at the time - such signs can also be found in Oklahoma City today, where several gas stations have bought into the same half-truths that were common 30 years ago. All because a labeling law recently came into force in the state. Before that people didn't know the difference.

Here's an article in the New York Times talking about the 'controversy.' Although the Times quotes many consumers who've been fed (and believe) the mistruths, not all is negative. This article talks about consumer choices - and how the station owner believes in renewables. This article says Oklahoma had the cheapest gas in the country this week (shouldn't they thank ethanol for this?).

This reminded me of a good blog post by the Clean Fuels Development Coalition that explained the 11 campaigns in history against ethanol. To read about the history of the anti-ethanol campaigns, click here. If people would read this, they'd understand why corn and ethanol producers work so hard to tell the positive story of ethanol.

July 24, 2008

CRP grazing can move forward

The Seattle district court judge that put a halt to haying and grazing on Conservation Reserve Program (CRP) acres has decided to let it happen -- but there are several limits that may keep some from taking advantage of the program. (He made the ruling since the National Wildlife Fund and USDA failed to reach an agreement earlier in the week.)

Producers with already approved CRP haying/grazing contracts can continue operations through the program's original Nov. 10 deadline. Farmers and ranchers who sent applications but have not received approvals can have their applications processed and, if approved, can hay until Sept. 30 or graze until Oct. 15.

Those who have not yet sent applications can - as long as they submit in their application a statement explaining that they need the program, and whether the producer made investments or preparations of $4,500 or more to participate. Documentation is needed. If approved, those producers also will be able to hay until Sept. 30 or graze until Oct. 1.

The judge said USDA did violate the National Environmental Policy Act and was wrong to decide, on the basis of an environmental evaluation, that the Critical Feed Use initiative would not have significant adverse environmental consequences. USDA decided based on that evaluation that a full environmental impact study was not necessary.

Photo: Oklahoma State University

Innovation can meet global food, feed demands

That is what the Alliance for Abundant Food and Energy believes – that through innovation, agriculture can sustainably meet the growing global demand for food and renewable forms of energy.

Founding members of the Alliance include Archer Daniels Midland, DuPont, John Deere, Monsanto and the Renewable Fuels Association.

In its news release, the Alliance said critics have tried to frame the debate as an "either/or" decision, making people feel they must choose between food and energy security. It believes this is a false choice that ignores both the capabilities of agriculture and our nation's history of using innovation to solve our problems. The Alliance realizes both are possible - and can be accomplished using less land and fewer resources than generally understood.

Podcast: Gas prices are up 355%...but what about food?

In this podcast, corn grower Joel High examines the current price of gas - compared to how food prices have changed.

Here's a good line:

In early 2002, the average family paid $102 per week for food, including eating out, and $25 a week for gas. Today we’re spending $124 a week on food and $83 for gas. So in six years food prices have gone up 23 percent but gas has gone up 335 percent. If gas had gone up the same amount as food, we’d only be paying $1.39 a gallon today.

Oil, weak dollar biggest driver in food costs

A Farm Foundation study written by three economists at Purdue University offers an interesting look at the the forces driving food prices. The study, “What’s Driving Food Prices?”, is available here. If you have a few minutes, the audio report by the report's lead author Wally Tyner is a good listen.

Tyner noted that in the 2004 to early 2008 period, oil prices went from $40 to $120 a barrel, while corn went from about $2 to $6 a bushel. He said 75 percent of that increase in corn price was due to high oil prices, while only 25 percent was due to an ethanol subsidy. He noted, though, that the subsidy was important and essential for development of the ethanol industry and that in recent times it has not been as nearly an important driver in corn prices as has oil.

In the report, Tyner said removing the subsidy would not return corn prices to those seen over the past decade - unless crude oil prices fell as well.

Interestingly, the study does not attribute growth in demand for grains by India or China as a driver in higher grain and food prices. Tyner said although demand is increasing in those countries, their production is also growing, as both countries would like to be self sufficient in these areas. He said China and India don't trade ag commodities to any great degree, especially corn or wheat, so their impact is minimal. China's demand for oil, however, does impact the oil markets.

As for the weak dollar, the study said the dollar's decline over the last few years has been an important factor in overall higher prices. The analysis "clearly shows" the historic links and how they have differed from one period to another depending on what else was going on in the global economy, the study said. "Oil, agricultural commodities and most other commodities are priced in U.S. dollars but are purchased in the local currency. So when the U.S. dollar falls as it has over the past six years, there must be a link with commodity prices," it said.

July 23, 2008

Legislation would help expand fuel choices

Senators Sam Brownback (R-KS), Ken Salazar (D-CO), Joseph Lieberman (I-CT), Susan Collins (R-ME) and John Thune (R-SD) have introduced the Open Fuels Standard Act, which would require that half of all new automobiles sold in the U.S. starting in 2012 to be flex-fuel. This requirement would jump to 80 percent by 2015.

Supporting the legislation is the Set America Free Coalition, which advocates the rapid adoption of flex-fuel vehicles as a way to develop a market for ethanol and other renewable fuels. A bigger market means more use -- and using more renewable fuels means using less imported oil. The often mentioned Robert Zubrin is a member of this coalition.

Although some people may not like the idea of a mandate, in this case the mandate would help bring more fuel choices to consumers - and at a very low cost. It only costs $100 extra to build a flex-fuel car - but as the number of cars that are equipped increases, that cost would likely drop. And just imagine what we'd all gain.

July 22, 2008

Pickens: We are paying for both sides of the Iraqi war

Oilman and billionaire T. Boone Pickens was in Washington today to testify before a Senate panel on the "Pickens Plan" that aims to increase renewable energy sources and get the U.S. off foreign oil. Although his plan focuses on wind, what really bugs him is imported oil.

But Pickens has talked favorably about ethanol in the past. This article, however, notes that Pickens told the panel today that as long as it gets us away from foreign oil, he's for just about anything -- and everything that's American. Ethanol fits that perfectly.

What drew interest here, though, is this comment: I am convinced we are paying for both sides of the Iraqi war.

That phrase is similar to those who argue that our more than a billion dollar a day foreign oil habit is, essentially, forcing us to pay for both sides of the war on terror. Robert Zubrin comes to mind, and he is a big believer in ethanol because it can be produced domestically and globally, which will change the dynamics of world energy markets.

EPA puts off decision on RFS waiver request

A Washington, DC-insider put the odds of EPA Administrator Stephen Johnson putting off a decision on whether to grant a 50 percent waiver of the Renewable Fuels Standard at 3 to 1.

It turns out the odds were right on, as Johnson said in a statement today that the agency needs more time to "sufficiently answer the Texas request for a waiver from the Renewable Fuels Standard (RFS)." He said additional time is needed to allow staff "to adequately respond to the public comments and develop a decision document that explains the technical, economic and legal rationale of our decision."

Johnson said EPA received more than 15,000 comments on the issue and that a number of the comments "raised substantive issues and included significant economic analysis. I believe it is very important to take sufficient time to review and understand these comments in order to make an informed decision."

EPA is also required to consult with the Departments of Agriculture and Energy in considering whether to grant or deny the waiver request. He said EPA has begun such consultations.

Although not specified, Johnson also appeared to make a reference to complaints by several Senators that he met privately with Texas Gov. Rick Perry, who filed the waiver request. Johnson said: "The process remains fair and open and no agreements have been made with any party in regard to the substance and timing of the decision on the waiver request. "

Johnson added that he was "confident" he will be able to make a final determination on the waiver request "in early August."

That timing is also interesting, considering USDA's first production report for the new crop is coming out August 12. That report will also include updated planted/harvested acre estimates following USDA's more in-depth survey after flooding earlier this year. How closely could EPA's decision and USDA's crop report be tied together?

Ethanol pipelines back on radar screen

Senators Tom Harkin (D-IA) and Richard Lugar (R-IN) have introduced legislation that would give ethanol pipeline owners the same tax benefits they receive for moving moving petroleum products.

According to this article, a provision in the tax code blocks Publicly Traded Partnerships (PTP) – which build and operate most liquid pipelines – from moving forward with plans for biofuels. By law, PTPs are supposed to earn 90 percent of their income from the exploration, transportation, storage or marketing of depletable natural resources, including oil, gas and coal -- but not renewable fuels.

The Harkin-Lugar bill would change the tax code to state that PTPs can earn “qualified” income from the transport, storage or marketing of any renewable liquid fuel approved by the Environmental Protection Agency.

While most of the country's renewable fuels are produced in the Midwest, the only option to transport such fuels to the coasts is via rail or truck. Pipelines could be another option.

There has been talk of an ethanol pipeline in Nebraska that would move ethanol to a regional terminal, and another that would move ethanol from Iowa to the Northeast. If this legislation would help them along, that may be a good thing.

July 21, 2008

Crop condition ahead of last year

USDA said today that 75 percent of Nebraska’s corn crop is in good to excellent condition, an increase of 3 percent from two weeks ago and one point ahead of the rating at this time a year ago. That leaves 19 percent of the crop in fair condition and 6 percent rated poor to very poor.

Nationally, 65 percent of the crop is in good to excellent condition, which is ahead of last year’s 62 percent and notable considering the type of weather we saw early in the growing season. Other national numbers include 25 percent in fair condition and 10 percent poor to very poor, compared to 25 percent fair and 13 percent poor to very poor last year

Although in good condition, corn is a bit behind
Only 43 percent of the Nebraska's crop was silking as of this past week. A year ago, 73 percent of the crop was silking – and the five-year average has 63 percent. That means the crop is only about five days behind the average. A week ago only 13 percent of Nebraska’s crop was in silking stage, so progress has been rapid and will likely continue to be rapid since weather has been favorable in most parts of the state. Nationally, 34 percent of the crop is silking, compared to 72 percent last year and the five-year average of 60 percent.

For details on Nebraska’s crop, click here, or for USDA's report, click here.

What's really 'pumping' up food prices

Billboards are going up in several cities across Texas that encourage people to visit TexasPriceCheck.com to learn the truth about food prices. The opening animation shows an oil derrick smashing a grocery cart.

As the home page says: Someone has made a mess of the truth about food prices by knocking over the facts and spilling false information all over the place. It’s time somebody mopped up.

"Clean up in the reality aisle!"

Although Texas-focused, the site includes a lot of good information, including the farmers share of everyday food items and how oil impacts food prices. The site is courtesy of the Texas Peanut Producers Board, Texas Wheat Producers Board and Texas Corn Producers Board.

Be sure to check it out.

July 20, 2008

Senators peeved on reported Perry meeting with EPA

A bipartisan group of Senators sent a letter Friday to Environmental Protection Agency administrator Stephen Johnson questioning him about a closed-door meeting he supposedly had with Texas Gov. Rick Perry on July 9.

A story on Brownfield said the meeting was to discuss Perry's request to cut the Renewable Fuels Standard (RFS) by 50%. Reports said Johnson told Perry he'd put off any final decision on Perry's request for the time being.

In the letter sent to Johnson, the Senators said they “expect a fair and open decision-making process on this matter that includes a good-faith consideration of the concerns of all interested parties. We cannot accept and will not tolerate decisions on the RFS that are made behind closed doors and in concert with only the Governor of Texas.”

They also ask for “an immediate meeting with you and your staff that is docketed, or otherwise officially noted” to gather information about the Perry meeting, learn about agreements between EPA and Perry on the waiver request and “for you to assure us that EPA is following the law and the proper decision-making process.”

Senators that signed the letter include Chuck Grassley (R-IA), Ben Nelson (D-NE), Tim Johnson (D-SD), John Thune (R-SD), Kit Bond (R-MO), Claire McCaskill (D-MO), Norm Coleman (R-MN) and Byron Dorgan (D-N.D.).

To view the response by Senator Ben Nelson, click here. To view Grassley’s full news release, and to view a copy of the letter, click here.

July 18, 2008

OECD report draws incorrect conclusion

The Paris, France-based Organization for Economic Cooperation & Development (OECD) came out with a report this week that suggests current biofuels are expensive, may not reduce greenhouse gasses by a significant amount and probably don’t help improve energy security. The 119-page report is available here (.pdf).

Some thoughts that pop to mind:
  • Biofuels today are cheaper to produce than gasoline at current oil prices. They also stimulate rural economies and save billions in farm subsidies.
  • Biofuels, including ethanol, reduce greenhouse gases by 30 percent or more. (OECD acknowledged this in the report…yet this isn’t enough? Maybe we should just use more oil?)
  • Biofuels, including ethanol, are already reducing U.S. petroleum needs by more than 330,000 barrels per day, helping to get us started down the road to a diversified fuel system.

OECD’s “model” also noted that a 28 percent decrease in world oil prices would lower grain prices 12 percent. At $6 corn that is 72 cents a bushel. OECD’s model predicts eliminating the current Renewable Fuels Standard would drop prices only 1 percent, or 6 cents. So what OECD is saying, if you believe its model, is that oil prices have a bigger impact on grain prices than the RFS.

How, exactly, then does OECD come to the conclusion that there should be a moratorium on biofuels development? Whose interests would be best served by that?

What OECD and others seem to forget is that you can’t get to advanced – “second generation” – biofuels by dumping the first. They want a magic solution to appear and solve the world's energy problems. But something has to lead the way, to build the infrastructure and prove that it works. Right now in the United States, that is corn ethanol.

Grazing/haying CRP acres stuck in court

The current court mess involving opening Conservation Reserve Program (CRP) acres for haying and grazing continues after U.S. District Judge John Coughenour yesterday extended his temporary restraining order.

The court case is in Seattle involves USDA's May decision to open up all CRP acres for the Critical Feed Use program after the primary nesting season ends for grass-nesting birds. USDA did this to provide additional feed options for livestock producers facing higher costs for grains and other feed ingredients.

According to an article on AgWeb.com, the judge ordered USDA and members of the National Wildlife Federation, which filed the lawsuit to stop haying and grazing, to find a compromise by noon on Tuesday. He suggested that some acres be released, maybe up to 2.5 million, as part of a compromise.

Several livestock groups joined in filing a brief supporting opening the acres, including the National Pork Producers Council, National Cattlemen's Beef Association and Nebraska Cattlemen. The National Wildlife Federation was joined in the lawsuit by several state affiliates.

In his blog, DTN's Chris Clayton said the judge made it clear he believes USDA violated its regulations and a federal law requiring an environmental impact study before releasing CRP acres in this case. Performing such a study would take a lot of time, including being open for public comment. That would come to late for livestock producers looking for additional feed options.

July 17, 2008

Voters support ethanol; blame oil for higher food prices

All of the efforts put toward blaming ethanol for a variety of ills has “failed to move the country,” according to a survey conducted by two polling firms. In fact, the survey of 1,200 registered voters shows that by a 2:1 margin, the public supports increased use of ethanol in our nation’s fuel supply. (To check out a Nebraska survey, click here.)

By a 71 to 17 percent margin, voters believe the rising cost of oil and gas is the primary reason food prices have been going up, rather than blaming the rising use of corn-based ethanol. There are some nice charts at the GoodFuels blog with more details.

The report also noted that:

Voters of all partisan and ideological stripes support increased use of this important, home-grown energy alternative and do not blame ethanol for the rising cost of food. The steadfast support of environmentalists is particularly telling, in that much of the campaign against ethanol has been waged in the environmental community.

You can download a .pdf of the report here.

The survey was conducted between June 23 and July 1 by the Democratic polling firm Greenberg Quinlan Rosner and the Republican polling firm Public Opinion Strategies, and was commissioned by the Renewable Fuels Association.

July 16, 2008

Podcast: Here's the Food Dude

As promised, we've been able to post three separate Food Dude "call-in" radio spots that aired in Nebraska. They've been well-received and bring home an important message for consumers. Similar spots have aired on a variety of radio stations across the country.

To listen, click the links below. Each is a minute long.

Spot 1, featuring Ian from Illinois, Tanya from Texas and Virginia from Virginia

Spot 2, featuring Winnie in Wisconsin, Norman from New York and Mark from Missouri

Spot 3, featuring Valerie from Vermont, Nick from Nevada and Georgia from (you guessed it), Georgia

July 15, 2008

Biodiesel Board: Don’t Buy What Grocers Trying to Feed You

In an article for the August edition of Biodiesel Magazine, the National Biodiesel Board's Joe Jobe said the recent attacks from the Grocery Manufacturers Association (GMA) blaming biofuels for rising food costs are "deceptive and just plain wrong." He said GMA’s attacks are not based on sound science, sound economics or common sense.

"Rather, they are based on the GMA’s desire to find an easy target for which to defend its profits," Jobe said. You can find the article here.

Jobe said NBB is "committed to fighting the political and corporate interests that are more concerned with protecting their own profits over the health, security and pocketbooks of American families."

He concludes his commentary with this: In the end, we are confident that Americans won’t be buying what the GMA is selling for one simple reason: its wrong.

Pork exports set a record

The U.S. Meat Export Federation said pork export sales in May set another monthly record -- while beef exports reached their highest levels since December 2003.

“The shortage in the global meat supply, combined with record pork production in the United States and the continued weak dollar are putting U.S. beef and pork in a very advantageous position in many export markets,” said Erin Daley, manager of research and analysis for USMEF, in this news release.

The new monthly record for pork (including variety meat exports) was set at 196,118 metric tons or 432.4 million pounds (valued at nearly $452 million) in May. Export volume was up 95 percent compared to May 2007 and 12 percent more than the April 2008 record. This put January-May pork (including variety meat) exports at 825,800 metric tons (1.8 billion pounds) valued at $1.86 billion, up 60 percent and 51 percent respectively from the same period last year.

Beef exports (including variety meat) in May of 83,761 metric tons (184.6 million pounds) were the largest since December 2003, and reached 78 percent of the May 2003 export volume and 97 percent of its value at nearly $309 million. The January-May volume of 355,982 metric tons (784.8 million pounds) is 29 percent higher and the value ($1.25 billion) is 39 percent higher than the same period last year.

Podcast: Corn supplies are plentiful

In this Podcast, Sutton corn producer Jim Hultman provides an update on how many corn acres were planted and overall corn supplies.

July 14, 2008

OPEC president must be delusional

How else can anyone explain OPEC president Chakib Khelil's comment that "the intrusion of bioethanol on the market" is responsible for 40 percent of the increase in oil prices? Just check out the article on MarketWatch if you can't believe it, either.

Khelil said the weak dollar and geopolitical worries are responsible for the other 60% rise in crude oil prices. All of this came from an Algerian newspaper. Khelil is also the Algerian energy minister. And if the report is accurate, clearly he doesn't understand that ethanol replaces, as in reduces demand, for oil. Less demand = lower prices.

Of course, the oil cartel OPEC doesn't live in reality, or at least not the same reality as the rest of us. In fact, Khelil told the paper that oil supplies are sufficient, that supplies are balanced with demand and that the current rise in prices isn't good for anyone. Except, of course, for OPEC and Big Oil, who are enjoying record dollars coming their way. But they don't count in his altered state of reality where everything -- but biofuels, apparently -- is peaches and cream.

Article on "confidential" report off the mark

A "leaked" World Bank "confidential" report that later proved to be a bit off the mark is still making the rounds, including being referred to by the Grocery Gang and it's hip-pocket economists as believable. The real and more correct report the World Bank promised to hurry out the door late last week hasn't yet appeared.

The hubbub began with an article in the U.K. newspaper The Guardian, which claimed to have gotten a hold of a "confidential" report that said biofuels like ethanol are responsible for 75 percent of the global increase in food prices. And the reason the report was still secret was political and involved the Bush Administration. The article didn't mention high energy prices and claimed drought and increased demand played only a minor role.

It turns out the draft report was a "working document" and wasn't a secret at all. The Wall Street Journal, which hasn't exactly been friendly to biofuels, saw the working document and concluded that it is "clear that the headline figure for biofuel’s role in the food crisis was a little overstated in the original article." Other things it noted were at play: low grain stocks, large land use shifts, speculative activity and export bans.

So the original article in The Guardian was a hack job - and not that good of one. But it does provide fodder for the anti-ethanol folks. And that is too bad, because when the real report comes out, it won't have the same attention-getting headlines.

July 13, 2008

Podcast: Ethanol can help end oil's domination

In this Podcast, Fremont farmer Ron Schultz reminds us all of the real cost of oil and how ethanol from corn can help end oil's domination.

Corn cups for iced coffee

At a neighborhood coffee shop in Lincoln yesterday, I was surprised not by the iced coffee but what it was served in -- a corn-based plastic cup. According to the baristas, the straw was made of corn, too. They were very enthusiastic about the cups. The shop -- The Cup (25th and Randolph) is in an old Pepsi bottling building and has a good atmosphere if you happen to be in the neighborhood.

Plastic cups at The Cup are made from PLA -- which is made from corn at a plant in Blair, Nebraska. The Natureworks plant churns out tons of the little corn-plastic BBs every day and ships them all over the world. They're turned into cups, deli containers, gift cards, fiber for clothes and decorative items, plastic wrap and a lot more.

Another company making unique things from corn is DuPont, which now makes its Sorona polymer from corn instead of petroleum. Although DuPont's polymer can be used for plastics, a great deal of focus is on carpet and fabrics. There's also the ADM-Metabolix joint effort, which is building a plant in Iowa to convert corn to plastic resin known as Mirel.

All of these efforts -- and more -- allow every day plastic items and fabrics that were traditionally made from petroleum to instead be made from a renewable resource. In this case, America's top crop: corn.

Other items made that use corn? Crayons, toothpaste, paint, aspirin, batteries, adhesives, paper, lubricants and hundreds of other items. The Nebraska Corn Board produced a brochure a year ago that highlights all of these and the many other uses of corn. To have a look, click here to download the .pdf file.

July 11, 2008

USDA increases total corn supplies

USDA increased corn ending stocks for the 2007-08 marketing year in its latest supply/demand report this morning – to 1.6 billion bushels. That increases the cushion going into the next marketing year. Click here for the full report.

For the next marketing year, USDA increased harvested acres by 100,000 based on the June 30 acreage report. It lowered production, though, by cutting yield estimates another half-bushel. That puts 2008-09 production at 11.7 billion bushels. But if you add in the 1.6 billion carry-in, that gives a total corn supply of 13.3 billion bushels.

USDA also cut corn for ethanol by 50 million bushels (although analysts believe this cut should have been larger). This cut was offset by an additional 50 million bushels going for feed use. In the end, USDA estimated next year’s carry-out to be 833 million bushels, up from last month’s estimate of 673 million.

The 2008-09 marketing year average price was projected to be $5.50 to $6.50 per bushel, up 20 cents on each end
of the range.

Although this report increases overall corn supplies, next month’s report is the biggie. Not only will it give first “real” production numbers, but it will include an updated acreage count based on USDA’s July survey of states that saw significant flooding.

July 10, 2008

Airlines take off on oil speculators

An interesting email arrived today from Northwest Airlines. Normally these emails are full of exotic destinations they would be more than happy take me to if only I would be willing to buy a ticket. But this one was different. It asked me to visit StopOilSpeculationNow.com and help put a stop to oil speculators that are driving up prices and hurting their bottom line. See this earlier post for more.

Here’s a quote from the letter:

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

When you follow their link, you’re welcomed to S.O.S. Now and an open few paragraphs blasting speculators. It also includes these lines:

Every time you buy products such as food or gas, you are impacted by unregulated, secretive and often foreign commodities futures markets. Speculators in these markets are increasingly buying and selling commodities such as oil even though they have no intention of using the product.

I’m glad to see they make the connection to food.

All the major airlines have signed on, but so have some truck and bus associations, gas and auto dealers groups and the Petroleum Marketers Association – the folks who sell gas, but don’t make it.

July 9, 2008

Rural Nebraska residents support renewable fuels

A whopping 91 percent of rural Nebraskans believe that “more should be done to develop renewable energy, such as ethanol, biodiesel or wind energy,” according to the 13th annual Nebraska Rural Poll conducted by the University of Nebraska's Center for Applied Rural Innovation. That's a lot of support for renewable energy like ethanol!

High energy and gas costs are having an impact on rural consumers, though: 91 percent said they have cut back on driving, 59 percent have canceled vacation plans and 18 percent have changed jobs to shorten their commute. Download the full report here.

Researchers told the Journal Star, in this article, that that the survey was conducted from March, when gas averaged about $3.20 per gallon, through May, when it averaged about $3.75. Gas is around $4 and holding will only make things worse.

Bruce Johnson, a professor of agricultural economics, told the paper that he hopes the results will prompt Nebraska’s elected leaders to keep pushing the state to become a leader in pursuing renewable energy. “The people of Nebraska are speaking here,” he said. “And there’s a resounding interest in moving this way (toward renewable energy).”

July 8, 2008

Is America losing its financial independence?

It was easier to ignore imported oil when it cost a mere $30 a barrel. At $140, however, you simply can’t ignore it. And not just because it costs $4 per gallon (or more) at the pump.

What expensive oil imports means is we are sending billions and billions of dollars to foreign countries, and many of these countries are not necessarily friendly to the United States. Take Venezuela. Thanks to high oil prices, President Hugo Chávez can finance his anti-American activities and keep himself in power.

This transfer of wealth also gives oil exporting countries more money to spend around the world. That means they can buy companies, assets and influence.

The McKinsey Global Institute completed an analysis of this, which was reported in a good article in the Wall Street Journal. This chart by McKinsey shows the foreign assets of several oil-exporting countries. Keep in mind this is from 2007 – before the latest run-up in oil prices.

In the WSJ article, Gerald Seib notes that Presidential candidates are trying to “raise awareness of the corrosive national-security effects of oil prices” – and that a real challenge for the next President is to find “common ground on what is now a genuine national-security problem.”

Of course we can’t just turn off the foreign oil spigot. But we shouldn’t close the domestically-produced biofuels spigot, either. In fact, the ethanol spigot is currently saving us about 330,000 barrels of petroleum per day -- its helping to diversify our fuel supply and lead the way for future biofuels.

CRP grazing opened in some areas

Agriculture Secretary Ed Schafer said yesterday that he is releasing Conservation Reserve Program (CRP) acres for livestock grazing in counties recently designated as Presidential Disaster Areas because of flooding. Several Nebraska counties are included.

To be approved, CRP participants must write their county FSA office, obtain a modified conservation plan and receive county office approval before beginning to graze. Participants will experience a 25 percent reduction in their CRP rental payments.

This follows an announcement in May that USDA would allow grazing/haying on more than 24 million CRP acres after the primary nesting season ends for grass-nesting birds.

Nebraska counties involved include:
Adams, Antelope, Arthur, Blaine, Boone, Boyd, Brown, Buffalo, Burt, Butler, Cass, Chase, Cherry, Clay, Colfax, Cuming, Custer, Dakota, Dawson, Dodge, Douglas, Dixon, Dundy, Fillmore, Franklin, Frontier, Furnas, Gage, Garfield, Gosper, Greeley, Hall, Hamilton, Harlan, Hayes, Hitchcock, Holt, Hooker, Howard, Jefferson, Johnson, Kearney, Keith, Keya Paha, Knox, Lancaster, Lincoln, Logan, Loup, Madison, McPherson, Merrick, Nance, Nemaha, Nuckolls, Otoe, Pawnee, Perkins, Phelps, Pierce, Platte, Polk, Red Willow, Richardson, Rock, Saline, Sarpy, Saunders, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Washington, Wayne, Webster, Wheeler, York

July 7, 2008

Crop progress update

Nebraska’s corn crop continues to progress nicely.

Moisture in the form of rain in some areas and irrigation in others has combined with warmer temperatures to push 72 percent of state’s corn crop into good to excellent condition, while 22 percent was fair and only 6 percent was poor to very poor, according to USDA's latest report. A year ago, 80 percent of the state's crop rated good to excellent.

Only 1 percent of the state's crop has reached the silking stage, compared to 11 percent average over the previous five years. Although this shows the crop is a bit behind, that is to be expected considering the cool spring we had -- and this number will increase rapidly over the next couple of weeks.

Nationally, 62 percent of the corn crop is in good to excellent condition, 27 percent fair and 11 percent poor to very poor. A year ago, 70 percent of the crop was good to excellent, 21 percent was fair and 9 percent was poor to very poor.

For details on Nebraska’s crop, click here.

Independence weekend ends with win for ethanol

Team Ethanol won it’s first IndyCar Series race yesterday at The Glen, with driver Ryan Hunter-Reay crossing the finish line first at the Camping World Grand Prix in Watkins Glen, N.Y. This is the second year that 100 percent ethanol has fueled the IndyCar Series – so the win by the Rahal Letterman team was certainly enjoyed by its ethanol company sponsors and corn growers, too.

In this video, Hunter-Reay notes that he’s an American kid winning on one of the best race courses in the country – with ethanol on the side of the car and ethanol in the car.

The win was a great way to close out the Independence Day weekend. With some celebrating July 4 as Energy Independence Day and others Anti-Dependence Day, the win by Team Ethanol couldn’t have come at a better time.

July 3, 2008

A-FAN open house a success

The Alliance for the Future of Agriculture in Nebraska -- A-FAN -- was one of the sponsors at an open house at Prairieland Dairy near Firth last Saturday. This is a really fun event that allows people to see how a real dairy works -- and what it contributes to the community. This was the fifth open house for Prairieland, which milks about 1,300 head.

There was face painting, milk mustache photos, a corn pile to play in, a hay bale castle, petting zoo, semi tractor rides and a free lunch (with milk and ice cream, of course!).

Tours of the milking facility and barns were fascinating. Did you know electronic ankle bracelets keep track of cow movements? If a cow takes a lot more steps than normal, it's time for her to be bred. Or that within minutes, milk from the cow is cooled from 102 degrees (cow temperature) to 34 degrees and loaded onto a truck? This keeps the milk fresh. And tasty.

If you've heard of A2 milk, you're familiar with Prairieland, as this is where it's produced.

A-FAN handed out green backpacks that included a lot of information on the importance of the livestock industry to Nebraska. Good stuff. This is a shot of the food tent and some of the crowd.

July 2, 2008

$100,000 gift led the attack on ethanol


That's not my headline up there. I took it from the Houston Chronicle, which wrote a scathing article on how the RFS waiver filed by Texas Gov. Rick Perry got started back in March before being filed in April.

Here's the time line the Chronicle put together:

March 25 : Poultry producer Lonnie "Bo" Pilgrim meets with Gov. Rick Perry to ask him to seek a waiver from federal mandates for the production of corn-based ethanol.

March 31: Pilgrim donates $100,000 to the Republican Governors Association chaired by Perry.

April 17: Pilgrim speaks to nine Republican governors in closed-door conference on energy in Grapevine.

April 24: Pilgrim's Pride lobbyists and public relations firm Public Strategies meet with Perry's staff on final details of waiver request.

April 25 : Perry formally requests waiver from Environmental Protection Agency.

June 24: Perry attends Washington, D.C., news conference promoting waiver. Event was organized by Public Strategies.

I'm not naive enough to believe this sort of thing doesn't happen. But it sure is nice to see it documented in this case. The reporter went through 596 pages of records obtained from the governor's office under the Texas Public Information Act. That's a lot of paper and a lot of good work.

July 1, 2008

High gas prices hurting restaurants

This really shouldn't be a surprise -- high gas prices are taking a bite out of the restaurant industry.

Twice in an Associated Press article yesterday people were quoted saying that they were eating out less because gas prices were eating up their budget. (The same article noted that two-thirds of people in a survey consider gas prices an extremely important issue -- more then the economy, health care and Iraq.)

Then this morning, an article pops up from a newspaper in Stoughton, Mass. This article does a good job highlighting, on a local level, how higher fuel/gas prices are impacting people's spending habits. Restaurants face fuel surcharges from all their suppliers (and likely the suppliers are paying them from their suppliers), and customers don't have the extra cash to spend eating out.

My guess is there are lots of articles like this out there.

Yet the restaurant industry has come out vocally against the ethanol industry -- which is producing fuel at at lower cost than gasoline and helping to keep gas prices lower across the country, saving consumers billions of dollars. So I guess the restaurant industry wants people to pay more for gas so they'll have less money to spend in their establishments? Crazy, huh?

Here's more craziness - In his blog, DTN's Chis Clayton quotes House Agriculture Committee Chairman Collin Peterson (D., Minn.) saying that oil companies are only using the amount of ethanol they have to - even though using more would save consumers money. Their doing this to hold down ethanol prices. In other words, the cheaper they can keep ethanol, the more they can mark it up at the pump. Gee, thanks, Big Oil.

Let's end with some good news: Biofuels help meet U.S. energy goals.