Post image for Pressure Grows on EPA to Suspend Ethanol Mandate

The worst drought in 50 years has destroyed one-sixth of the U.S. corn crop. The USDA’s World Agricultural Supply and Demand Estimates (WSDE) report, released Friday, projects the smallest corn crop in six years and the lowest corn yields per acre since 1995.

As acreage, production, and yields declined, corn prices spiked. Last week, corn futures hit a record high of $8.29-3/4 per bushel.

If corn prices remain  high through 2013, livestock producers who use corn as a feedstock will incur billions of dollars in added costs. “These additional costs will either be passed on to consumers through increased food prices, or poultry farmers will be forced out of business,” warn the National Chicken Council and National Turkey Federation.

Even before the drought hit, corn prices were high. Prices increased from $2.00 a bushel in 2005/2006 to $6.00 a bushel in 2011/2012, notes FarmEcon LLC. A key inflationary factor is the Renewable Fuel Standard (RFS), commonly known as the ethanol mandate. Since 2005, the RFS has required more and more billions of bushels to be used to fuel cars rather than feed livestock and people.

Suspension of the mandate would allow meat, poultry, and dairy producers to compete on a level playing field with ethanol producers for what remains of the drought-ravaged crop. That would reduce corn prices, benefiting livestock producers and consumers alike.

EPA Administrator Lisa Jackson has authority under the 2007 Energy Independence and Security Act (EISA) to waive the RFS blending targets, in whole or in part, if she determines that those requirements “would severely harm the economy or environment of a State, a region, or the United States.” The pressure on her to do so is mounting. [click to continue…]

Post image for ♫ Corn Is Busting Out All Over ♫ (Update on Global Warming and the Death of Corn)

About a year ago on this blog, I offered some skeptical commentary about the gloomy testimony of Dr. Christopher Field of the Carnegie Institution for Science, who warned the House Energy & Commerce Committee that global warming would inflict major losses on U.S. corn crop production unless scientists develop varieties with improved heat resistence.

I noted that long-term U.S. corn production was increasing, including in areas where average summer temperatures exceed 84°F, the threshold beyond which corn yields fall, according to Field.

Well, this just in, courtesy of the Renewable Fuels Association (RFA): USDA projects the U.S. corn crop for 2012 to reach 14.79 billion bushels, the biggest ever. RFA’s objective, of course, is not to debunk climate alarm, but to assure us that we can have our corn (ethanol) and eat it too. Nonetheless, the numbers are mighty impressive and indicate that, in this decade at least, U.S. corn farmers are more than a match for climate change. From RFA’s briefing memo:

At 14.79 billion bushels, the 2012 corn crop would:

  • be a record crop by far, beating the 2009 crop of 13.09 billion bushels by 11%.
  • be 65% larger than the crop from 10 years ago (8.97 billion bushels in 2002).
  • be more than twice as large as the average-sized annual corn crop in the decade of the 1980s (7.15 billion bushels on average).

The 2012 projected yield of 166 bushels per acre would:

  • be a record yield, beating out the 2009 average yield of 164.7 bushels per acre.
  • be only the third time in history yields have topped 160 bu/acre, the others being 2009 (164.7) and 2004 (160.4).
  • be 35% higher than the average yield from the 1990s and 12% higher than the average yield since 2000.
Post image for Obama Administration Deserves an F-minus on Global Food Security

The non-profit Chicago Council on Global Affairs this week gave the Obama administration a B-minus grade for its progress in furthering food security in poor countries, according to a story in today’s ClimateWire (subscription required).

I do not understand how any rational foreign policy expert could award the Obama administration a B-minus for its performance on global food security. This high a score is possible only if the U.S. was graded on a curve with North Korea and Zimbabwe.

During the period under evaluation by the Chicago Council on Global Affairs, America’s Soviet-style production quota for ethanol, a motor fuel distilled from corn, increased almost 4 billion gallons, or 104 billion pounds of maize. This year American farmers will dedicate about a third of the U.S. corn crop—the largest in the world—to ethanol. As I explain here, here, and here, this massive distortion pushes up the price of foodstuffs on the global grains and oilseeds market, which harms urbanites in developing countries. Simply put, our stupid ethanol policy is one of the greatest threats to food security in the world today, if not the greatest.

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Post image for Two Stupid Energy/Environment Policies That Starve Poor People

1. Ethanol Mandates: In an effort to further “energy independence,”* major agricultural producing countries have enacted Soviet-style production quotas for ethanol, a motor fuel distilled from food.

This year, about a third of the U.S. corn crop will be used to manufacture 13 billion gallons of ethanol. By law, that will increase to 15 billion gallons every year after 2015. The European Union mandates that ethanol distilled primarily from palm oil and wheat, constitute an increasing percentage of the fuel supply, ultimately 10% by 2020.

Global ethanol production is a new and tremendous source of demand for food that has had a significant impact on the price of grains and oilseeds. According to a report commissioned by the World Bank, global demand for fuels made from food accounted for nearly 70% of the historic price spike in wheat, rice, corn, and soy during the summer 2008.

2. Rainforest Protections: Burning rainforests is an important link in the global food supply chain. In Brazil, farmers are clearing the Amazon rainforests to meet rapidly growing global demand for soybeans. In Indonesia, they slash rainforests to harvest palm oil seeds for export to Europe.

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Post image for Ethanol: Coburn, ATR, WSJ

There is an ongoing ethanol spat between Senator Coburn (R-OK) and Grover Norquist, President of Americans for Tax Reform. The dispute is over conservative support for a bill that would repeal the ethanol tax credit, which has the effect of raising an industry specific tax. Americans for Tax Reform comes down hard on any effort to increase taxes. The Wall Street Journal added their two cents in favor of Senator Coburn:

Our readers know Mr. Norquist as the plucky author of the no-new-taxes pledge, which has helped to make tax increases a red line in Republican politics. In a letter to Mr. Coburn, a deputy of Mr. Norquist writes: “Repealing the ethanol credit is the right thing to do, but other taxes must be reduced in the same legislation by at least this much to prevent a net tax increase.”

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Post image for Ethanol Industry Continues to Deflect Blame on Food Prices

Instead, they blame those darned speculators (are they aware of the important role played by commodity markets?) again. The industry continues to find support in high places:

Speaking to farmers earlier this month, the Obama administration’s agriculture secretary said he found arguments from the like of Nestlé “irritating”. Mr Vilsack said: “The folks advancing this argument either do not understand or do not accept the notion that our farmers are as productive and smart and innovative and creative enough to meet the needs of food and fuel and feed and export.”

Well, the price of corn has almost doubled in the last 6 months. Now, its obviously unfair to blame this entirely on biofuels. Food crops are heavily dependent on a number of other important factors like the price of oil, the weather, crop yields, etc. However, with 35% of U.S. corn being turned into biofuels, it clearly has a major effect on the price, driving it upwards (and driving other commodities higher as well, as farmland becomes more scarce). Globally, U.S. exports provide about 60% of total corn supply.

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At Tuesday’s House Energy & Commerce Committee hearing on Climate Science and EPA’s Greenhouse Gas Regulation, Dr. Christopher Field of the Carnegie Institution for Science, presented a scary assessment of global warming’s impact on U.S. grain yields. Field’s written testimony states, in pertinent part:

In the United States, the observed temperature sensitivity of three major crops is even more striking. Based on a careful county-by county analysis of patterns of climate and yields of corn, soybeans, and cotton, Schlenker and Roberts (Schlenker and Roberts 2009) concluded that observed yields from all farms and farmers are relatively insensitive to temperature up to a threshold but fall rapidly as temperatures rise above the threshold. For farms in the United States, the temperature threshold is 84˚F for corn, 86˚F for soybeans, and 90˚F for cotton. For corn, a single day at 104˚F instead of 84˚F reduces observed yields by about 7%. These temperature sensitivities are based on observed responses, including data from all of the US counties that grow cotton and all of the Eastern counties that grow corn or soybeans. These are not simulated responses. They are observed in the aggregate yields of thousands of farms in thousands of locations. [click to continue…]

Humor me for a moment and imagine that I am a superhero who is part of a Super Friends team at the Competitive Enterprise Institute. We have sworn to use our superpowers only to combat a particular form of evil: rent-seeking. Naturally, we’d need a nemesis. This caricature of evil would represent everything we stand against; it would be the ultimate political panhandler.

Without a doubt, our nemesis would be King Corn.

Fantasies aside, the corn lobby, a.k.a King Corn, is unbeatable inside the beltway. In the 1980s, it secured federal giveaways to NOT grow corn. The lobby has since moved on to the ultimate boondoggle: corn fuels. By playing up jingoistic fears of “energy dependence,” King Corn has convinced the Congress that ethanol, a motor fuel distilled from corn, is a national security imperative, despite the fact that it increases gas prices, it’s awful for the environment, it contributes to asthma, and it makes food costlier.

So, in 2007, the Congress passed a Soviet-style ethanol production quota that forces Americans to use corn-fuel in their gas. Thanks to this mandate, American farmers devoted a third of this year’s corn crop to ethanol. Thus corn, soy, and cotton (the three crops grown on corn-hospitable soil in the U.S.) have become recession-resistant.

You’d think that a production quota, along with generous subsidies (to the tune of 51 cents a gallon), would be enough, but there can never be “enough” for King Corn. Now it has its eyes on an even higher production quota. There was, however, an intermediate step to this higher goal-the EPA had capped the percentage of ethanol that could be included in regular gasoline at 10%, due to concerns about engine harm beyond that point. For years, the corn lobby has been trying to lift that cap to 15%. Yesterday, the EPA relented.

Raising the ethanol cap was opposed by the oil industry, the environmental lobby, and the public health lobby. These are K-street titans, and they were vanquished by King Corn.

Behold, the power of King Corn.

Last week Senator Blanche Lincoln (D-AR) became chairman of the Agriculture Committee, after Senator Tom Harkin (D-IA), the previous chair, accepted the gavel at the Health, Labor, Education and Pension Committee (vacated by the passing of Ted Kennedy).

Lincoln becomes the first female to chair this powerful committee, and her ascension to the top-spot will have a big impact on the country’s energy policy.

For almost a decade, the Senate Ag Committee has been the primary benefactor of ethanol, a fuel made from corn. Regardless whether the Ag chair was a Republican or a Democrat, the Committee, which is dominated by corn-belt politicians, showered ethanol with subsidies and give-aways-and even a Soviet-style production quota that forces consumers to use it. Government support for ethanol has been great for corn growers (they’ve seen demand increase by almost 50% since 2005), but it’s awful for livestock farmers, who have seen the cost of corn-feed skyrocket. Consumers have also been harmed, as the price of corn derivatives (meat, dairy, soda, etc., etc.,) has increased so sharply that inflation of the cost of food doubled the historical rate in 2008.

With Lincoln taking the gavel of the Ag Committee, however, the ethanol gravy train might be coming to an end. That’s because Lincoln doesn’t represent the corn-belt. To be sure, they grow corn in Arkansas, primarily in the eastern part of the state. But in western Arkansas, farmers raise chickens. In fact, the Natural State is the nation’s #2 producer of broiler chickens. America’s ethanol policy has seriously compromised the chicken industry, so we can expect Lincoln to take a more conservative approach with fuels made out of food.

Lincoln is also likely to affect the climate debate. The Ag Committee has some jurisdiction over climate change legislation, and Lincoln’s vote on cap-and-trade is a priority for her caucus leadership, which is having a tough time finding support for a climate bill among Senate Democrats. But Arkansas politics are decidedly unfavorable to global warming alarmism. Rep. Vic Snyder (D-Arkansas), who represents Little Rock and much of Pulaski County, was the only member of his State’s delegation to vote for the American Clean Energy and Security Act, cap-and-trade legislation that passed through the House of Representatives in late June, and he has been hammered over the airwaves by utilities, agriculture interests, and political opponents ever since. Now, there is considerable speculation that his seat is in jeopardy-all thanks to his vote for a cap-and-trade. No doubt Lincoln has noticed Snyder’s plight.

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