Governors meet and discuss ethanol

Over the weekend, the nation’s governors gathered for their summer meeting and the agenda included a forum to discuss the nation’s energy policy. It was no surprise that ethanol mandates and subsidies were discussed at length. The major theme to come out of the forum was that there needs to be a shift from grain-based ethanol - either immediately or at least much quicker than the current pace.

Two governors were very vocal about their concern about corn-based ethanol. West Virginia Governor Joe Manchin said “I truly do not believe that a food-based product should be used for energy, where almost all energy needs are met by coal. It should be used for human consumption.” South Carolina Governor Mark Sanford added that the EPA requirement is “a totally bogus government mandate.”

Others governors supported moving away from corn-based ethanol to cellulosic ethanol. At the summit, Michigan Governor Jennifer Granholm proposed using more wood products found in her state. Pennsylvania Governor Ed Rendell of Pennsylvania noted that his state “could be to cellulosic ethanol what Iowa was to corn-based ethanol.”

As the debate continues, let’s hope more governors realize the consequences that grain-based ethanol has created and help find solutions to the problem.

G8 Summit

The leaders of the G8 countries gathered today for their three-day summit in Hokkaido Tokado, Japan. The leaders will focus on a variety of issues, including the global food crisis. Prior to the opening session, the World Bank released a 10-point plan for tackling the food crisis and included recommendations that the G8 should consider.

One of the actions that the World Bank recommended to the G8 was a commitment to revising policies towards bio-fuels due to the competing food security and energy security priorities. The World Bank wants the United States and Europe to ease subsidies, mandates and tariffs on bio-fuels that are derived from corn and oilseeds. The report cited the consensus that bio-fuels have had a substantial impact on land use and food prices (IFPRI, OECD, IMF, World Bank). The report also stated that phasing out production subsidies and reducing tariffs in the EU and the US would allow bio-fuels to be produced from the most efficient feedstock by the lowest cost producers, removing pressure from food prices and allowing for the benefits of bio-fuels without the negative consequences.

You can click on the full 10-point plan here. Hopefully the G8 meetings will take some of the World Bank’s advice and take action this week.

The 4th of July

This Friday, families and friends will gather together across the United States to celebrate our nation’s independence. As Americans prepare for BBQs and parties, they face higher food prices at the supermarket as food staples needed for a BBQ are at all-time highs as well.

The Center for American Progress released a report this week on how much more a BBQ will cost for the average American family this year compared to last year. For a an average sized party, you will have to pay nearly 5% more than you did in 2007 and over 31% what you paid in 2000 .

Here are some notable items that have seen an increase over the past year:

• 3 packages of hamburger buns are up 10% from $3.86 to $4.26


• 2 pounds of macaroni for pasta salad are up 17% from $1.99 to $2.33


• A package of slices of American cheese are up 14% from $3.74 to $3.94


• For dessert, a ½ gallon of ice cream is up 5% from $3.88 to $4.08

Numerous converging factors have contributed to the increase in the price of food for consumers. Only one factor, however, is within control of federal lawmakers -- the government's ethanol policies. Despite the rise in food prices, hope everyone has an enjoyable and happy 4th of July.

Texas Governor Rick Perry Gets it Right at Press Conference

Texas Governor Rick Perry held a press conference in Washington, DC on Tuesday, June 24 to discuss his request for a waiver from the Renewable Fuel Standard (RFS) mandate. He has asked the EPA and Administrator Johnson for a 50% reduction in the mandate because of the economic strain it has had on Texas consumers and protein producers. The EPA is required to have a 30-day open comment period before making a decision and the period closed on Monday.

There were over 30 journalists at the press conference and over 350 media outlets picked up at least one of the stories written about Governor Perry’s efforts. He also did interview with CNBC’s Erin Burnett and with Wolf Blitzer on CNN. You can read and watch the coverage by going to the “Recent News section.”

Governor Perry understands that using a food source as a type of energy is just bad policy and with the devastation in the Midwest because of flooding, a corn shortage is a real possibility. Let’s hope that the EPA understands the problems that the RFS mandate has created and grants Texas’ request.

Midwest Flooding Will Cause Food Prices to go even higher

The United States and the rest of the world will soon feel the effects of the catastrophic Midwest floods.

The flooding in Iowa, Illinois, Indiana, Wisconsin and Minnesota has helped push the price of corn to over $7/bushel and it looks like the entire food chain is going to be feeling the effect as well. In Iowa, more than a million acres have been washed out and destroyed. And experts estimate that 2 million acres of soy have been lost to water, putting the total grain loss at 20% so far, and there may be more rain to come.

The flooding and wet weather has delayed planting and crop emergence in many parts of the Corn Belt this spring. Last week, the USDA lowered the projected 2008/09 corn production and yield estimates for the U.S. based on recent reports after the flooding had occurred. The projected lower supply combined with soaring global demand in addition to the increased use of corn for ethanol, have significantly waned the worldwide supply of staples and drove corn prices to record highs.

Let’s hope the devastation in Iowa has ended and people get the aid they need to get back on their feet, but the last few weeks have shown that domestic energy supplies are volatile and may not provide the energy security that policymakers had hoped.

Poll finds Farm-Belt Voters want to eliminate or scale back corn ethanol mandate

This week the National Center for Policy Research, a think tank in Washington, released the results of a poll they conducted regarding the corn ethanol mandate. The poll found that 41% of Americans want Congress to repeal the corn ethanol mandate entirely, while 35% want Congress to repeal the law it passed last December to double it. Just 6% want the mandate to increase as planned while 5% want it to be even expanded further. Interestingly, the survey also found a majority in the Farm Belt want Congress to change the ethanol policy. Twenty-five percent want it repealed entirely while 30% want it scaled back.

The Week in Ethanol

Last week, the United Nations hosted a 3-day summit on the global food crisis in Rome. The summit was attended by 183 countries and included heads of state, such as Egypt President Mohammed Hosni Mubarak and Brazil President Luis Inacio Lula da Silva.

Despite a consensus that corn-based ethanol is contributing in some part to the rise in food prices, an agreement could not be reached on asking for international guidelines in biofuel production. Agriculture Secretary Ed Schafer echoed the Administration’s stance that the effect is only 2-3%, while most other countries view the effect as much more substantial.

While other factors are contributing to the rise in food prices, such as a growing population that creates more demand for food and energy, and drought and climate issues, ethanol policy IS the only factor that lawmakers can control. It’s time for them to start providing relief from high prices where they can.

The need for relief is emphasized by the latest employment numbers. Last Friday the Department of Labor released new jobs data and as a result, the Dow Jones Industrial Average lost 400 points in one day. The nation's unemployment rate jumped to 5.5 percent in May, the biggest monthly rise since 1986, with employers cutting 49,000 jobs. With so many people losing their jobs in May, and still having to put food on the table, times are tough. Additionally, since food and energy prices keep rising with no end in sight, paychecks aren't stretching as far, which could further curb economic growth.

U.N. Says Food Plan Could Cost $30 Billion a Year

From the New York Times. Faced with an immediate hunger crisis and the need to double food production in the next 30 years, world leaders meeting Tuesday to discuss soaring food prices were mostly in agreement on how the problem could be resolved. The questions were how to get there and who was going to pay for it.

Here is the link to the full article.

Bioenergy: Fuelling the food crisis?

From the BBC. The biofuel debate is electrifying the UN food price crisis summit in Rome, pitting nations against each other and risking transforming bioenergy - once hailed as the ultimate green fuel - into the villain of the piece, the root cause behind global food price spikes.

Here is the link to the full article.

Food Summit Heads for Biofuels Clash

Biofuel subsidies came under attack on Tuesday at the opening of the United Nations food summit in Rome as the head of the UN’s Food and Agriculture Organisation claimed that “nobody” understood the diversion of food to fuel cars.

The opening salvo is likely to set the tone for the next three days and put countries such as the US and Brazil, the world’s largest biofuel producers, and also the European Union, on the defensive over their support of biofuel production.

Here is the link to the full article.

Is corn boom expanding Gulf of Mexico's 'dead zone'?

From the Minneapolis Star Tribune, Some fear an ethanol-fueled harvest in the Midwest may be behind the hard times for marine life at the other end of the Mississippi River.

Here is the link to the full article.

World Bank President Calls for Easing of Biofuel subsidies

In preparation of the United Nations Global Food Summit in Rome this week, World Bank President Robert Zoellick wrote a commentary piece in Friday's Financial Times outlined a 10-point plan for tackling the global food crisis, which he called "man-made." Zoellick specifically called for the U.S. and Europe to ease biofuel subsidies, mandates and tariffs derived from corn and oilseeds. He also said that our "use of corn for ethanol has consumed more than 75 percent of the increase in global corn production over the past three years.

Here is the link to the full article.

Food Report Criticizes Biofuel Policies

From the New York Times. "The energy security, environmental and economic benefits of biofuels production based on agricultural commodity feed stocks are at best modest, and sometimes even negative," says the report, prepared by the Food and Agriculture Organization of the United Nations and the Organization for Economic Cooperation and Development. "Alternative approaches may be considered that offer potentially greater benefits with less of the unintended market impact."

Ethanol Mandates Cause Rising Food Prices

Guest commentary from John Lott a senior research scientist at the University of Maryland. Contains a lot of the same points you've seen over and over.

Rising Food Costs

From the New American... "Perhaps most conspicuous have been the accusations against ethanol producers. The diversion of vast acreages of corn to the production of ethanol rather than food has come suddenly under intense international scrutiny, and well it might. "

Some Biofuels Might Do More Harm Than Good To The Environment, Study Finds

A new study from the University of Washington takes a look at sustainability and the ecological footprint of ethanol. "The study looked at factors such as the energy needed to produce a renewable fuel source compared with how much energy is produced, the impact on soil fertility and effects on food supply when fuels based on crops such as corn and soybeans are mixed with fossil fuels. Based on those factors, the authors determined that corn-based ethanol is the worst alternative overall."

Ethanol: Don't waste food

Another one from the Charleston Gazette, that basically says the same thing. "In April, commenting on international food riots, George Bush said he supports corn ethanol... Fine. But the fuel should be produced from other plants, not from a pillar of the food supply. It's also in America's national interest to prevent hunger and dangerous unrest in parts of the world that are unstable or may not like us."

Congress can help ease food prices

From the Dallas Morning News Editorial page today. "We're all for developing alternative energy sources for conservation, environmental and national security reasons, and biofuels have an important role to play. But corn-based ethanol is playing a less significant role than expected on the environmental front and has become a major driver in escalating food prices.
Easing the ethanol requirement could ease family budgets. Congress needs to act now."

Have a Great Memorial Day Weekend

Hopefully you can enjoy some time off, but more importantly, take some time to remember those that have served our country.

Not that I get many comments other than spam, but I will be turning on the comment moderation feature for the weekend so that I can forget about cleaning out spam comments and focus on enjoying a few days off. If you leave a comment, it will not show up until Tuesday. Have a great weekend.

Ethanol Vehicles for Post Office Burn More Gas, Get Fewer Miles

Ouch. The US Postal Service started converting their fleet over to ethanol capable vehicles and are finding out that the 29% lower mileage is costing them money. I wonder when they placed the order? If it was within the last year, someone in purchasing should have done a Google search and read this year old article at Edmunds comparing ethanol and gasoline. Their Tahoe on ethanol got 13.5 mpg on the road vs. 18.3 when running gasoline.