Archive for June, 2011

Ethanol, Congress and tax credits

(Full article can be found at http://deltafarmpress.com/government/ethanol-congress-and-tax-credits)

An economist’s perspective on recent ethanol legislation
David Bennett

On Friday, June 17, the Senate voted 73-27 in favor of eliminating the Volumetric Ethanol Excise Tax Credit (VEETC). The bipartisan vote, which reversed a Senate vote taken just two days prior, would discontinue a 45-cent-per-gallon tax incentive that goes to blenders and refiners when blending ethanol into gasoline….
Shortly after the vote, Delta Farm Press spoke with Chad Hart, Iowa State University assistant professor of economics, about the situation….Hart, who studies and follows the ethanol industry, spoke on the Senate’s breach of tax legislation protocol, the Klobuchar/Thune alternative and how the House might react….
On the reason members of the House are agitated by the Senate’s VEETC vote…

“Traditionally, any bill that deals with taxes starts in the House.

“When the Senate made this move on the VEETC, it was a tax change and should have started in the House. Procedurally, that’s how Congress goes about it and is why the House is in an uproar.”

On what Coburn was trying to accomplish…

“Coburn wanted to put a marker, if you will, in the sand. He wanted to say ‘we’ll have this vote and show there are enough votes in the Senate to eliminate this tax credit, right now.’

“I think he was thinking ‘we’ll get this vote, and we’ll show the House we’re serious. The House will pick it up and vote on it.’

“It’s true this was a symbolic vote. But it was also a strategic vote. It is now established, by a sizeable majority, that there are enough votes in the Senate to completely get rid of the tax credit.”
Our Take:
Yes, the now-passed Coburn/Feinstein amendment is attached to a bill that may never see the light of day, so there’s no immediate impact to VEETC. But the writing is on the wall. As ethanol expert Hart says in the excerpt quoted above, this proves the votes are there in the Senate to chuck the ethanol blender’s credit.

The blatant hypocrisy of Coburn is frankly galling. He and many other congressional leaders would eliminate the $6 billion in support for ethanol while they leave alone more than $25 billion in write-offs, credits and freebies that the oil industry enjoys each year.

We would like to point out the bottom line in this behavior–Coburn and his colleagues are voting against American jobs–corn ethanol supports 76,000 farmers and 400,000 agribusiness-related jobs. And they are voting to increase foreign wealth at the expense of the American consumer who stands to pay more for gasoline with less effective competition from domestically produced ethanol.

We get a very slim portion (and dropping) of our gasoline supply from domestic oil production. We wouldn’t even mind preserving a rational level of oil industry support that helps keep these jobs going, while stripping away such things as credits for foreign taxes paid by big oil. Do we really need to subsidize payments to the Chinese? Does Exxon deserve government support when it makes $10 billion dollars profit (not revenue, but profit!) in a single business quarter?

Coburn and company don’t represent their constituents, but instead toe the line for the greediest, most myopic part of corporate America, which has used the tax code to subsidize the export of good-paying jobs. When will these elected officials, and the companies they represent realize that without a growing middle class and the spending power they command, corporate America is doomed to become a fifth-rate, bargain-price competitor. Remember what people used to think when they saw the label “Made in Japan” on the bottom of a toy or dime-store item a generation ago. Tom Coburn is putting us on the fast track to people around the world thinking the same thing now when they read pick up a product and read the label, “Made in America.”

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US ethanol industry margins, profit up despite corn price woe: new study

by Jim Lane, Biofuels Digest

In Minnesota, overall ethanol industry profitability gained by $0.08 per gallon in 2010, according to an annual benchmarking study released by Christianson & Associates. The study’s authors found that ethanol yields remained at an average of 2.725 gallons per bushel, and that plants reduced long term debt by an average of $0.20 per gallons.

Total revenue jumped from a low of $1.77 to $2.43 per gallon by Q4 as ethanol prices increased. In looking at feedstocks, the authors found that “ethanol prices and gasoline prices were more correlated to sugar prices over the past two years than other commodities.

“When breaking out the quarterly data correlation between 2009 and 2010 the results are quite revealing. Corn and ethanol were nearly perfectly correlated in 2010, but were negatively correlated in 2009. Sugar and gasoline actually were most correlated over the period than any other commodity pairing,” the authors wrote.

Our Take:
One of the unintended consequences of the protracted debate about the VEETC blenders’ credit is the impression among people without firsthand knowledge of the industry, that the ethanol industry is in trouble financially.

So here are a couple quick metrics that show the strength in the industry. At least for Minnesota (but we would venture that as MN goes, so goes the nation). Profits for ethanol producers have risen. Debt per gallon has fallen. Anyone predicting the end of corn ethanol is greatly overstating rumors of our demise.

Videos on Facebook–MCGA Agvocate reaches out to the public

Written by Jonathan Eisenthal

The first thing Greg Tusa, 20, did when he was selected as one of the three 2011-12 MCGA Agvocates was start a Facebook page called “Rooting For Agriculture,” and post a video of himself talking about his family farm. Now the trick will be to get anyone looking for farm information by surfing the web, using Twitter, Facebook or other social media, to find their way to his page.

Tusa looks forward to the challenge. As an MCGA Agvocate, he earns a scholarship while attending public events and communicating by social media on behalf of farming. The program, begun by MCGA two years ago, achieves a double-benefit by helping these young people move towards their career goals, while developing them as the future leaders agriculture will need in order to succeed in the 21st century.

The Agvocate program brings Tusa, Leah Johnson and Kelsey Gunderson–all agriculture students–into contact with ag leaders and gives the three opportunities to hone leadership skills at gatherings like the Minnesota Agricultural Ambassadors Institute, which recently took place in Willmar.

As Tusa explains in his video, he grew up in Alpha, Minnesota, on a 1,000 acre corn and soybean farm, where, among other things, they utilize precision agriculture techniques to maintain the most efficient use of farm nutrients, in order to conserve the environment. He is a junior at South Dakota State University, studying ag business, with minors in accounting and ag marketing.

“I’m looking towards a career in ag lending, but I’m also thinking about returning to the farm,” said Tusa. These days, the two occupations are not mutually exclusive.

Tusa has seen ag leadership at first hand. His father, Loren, has served in many ag leadership positions, including president of MCGA, about ten years ago.

“My experiences in 4-H and FFA have helped me to become aware of the lack of consumer understanding about agriculture and saw that this opportunity to be an Agvocate was a great way to educate the public,” said Tusa. “Working at the Minnesota State Fair at the Miracle of Birth Center, I would have people come up and ask why we need this dairy cow when we can get our milk from the grocery store. As strange as it may seem, they didn’t get the connection that their milk from the grocery store was produced from dairy cows by dairy farmers.”

Tusa thinks the chance to network with other young leaders will be an essential part of the Agvocate experience. He seeks out such opportunities wherever they can be found, and in addition to joining the MCGA Agvocate program, Tusa has been accepted as one of three Minnesota students to take part in FFA’s New Century Farmer program–they are among only 50 students to be selected for the event which takes place in late July in Des Moines, Iowa.

Other networking opportunities are less formal, but just as important. Tusa felt that he learned a tremendous amount about the whole spectrum of agriculture, thanks to dorm arrangements at SDSU’s agriculture school, which placed him together with kids who had grown up around beef cattle operations, sunflower farms, wheat farms and the whole range of agricultural production.

One of the pieces of the farming puzzle Tusa wants to share with the public is the financial side–how much risk is involved, how much capital it takes for a young farmer to start out and how much money is tied up in the things that allow farmers to produce their products.

Booster for E85 and farm knowledge joins MCGA Agvocate program

Written by Jonathan Eisenthal

Since high school, Leah Joy Johnson has made the rounds to different public events, creating posters and giving talks to tell people about the advantages of using E85 — the 85 percent ethanol fuel blend. To Johnson, the most important reason to use ethanol may be that it builds up the farm economy and keeps rural America strong.

So Johnson jumped at the chance to be an MCGA Agvocate, to make use of the platform it affords to speak to the public and educate people about issues she cares deeply about.

Minnesota Corn Growers Association started the MCGA Agvocates program two years ago. It offers college students the opportunity to speak on behalf of agriculture in a variety of settings, including via social media, and to meet leaders in agriculture and other industries. In exchange for a year’s commitment, each student receives scholarship funds.

Johnson, like the other two Agvocates this year, comes from a farm family. The Johnsons operate a farm in Evansville, Minnesota, near Alexandria, and they also travel the midwest doing custom harvesting each fall. Johnson is a junior at North Dakota State University in Fargo, where she studies agricultural economics, with a minor in ag communications. Eventually, she would like to be involved in the family farming operation, on the business side.

“I am really passionate about supporting agriculture, and I have become especially interested in this over the past year,” said Johnson. “I have a growing concern about the farming knowledge of people who live in urban and suburban areas. They didn’t know what a tractor is, when to plant crops and other information that’s very basic about producing food. It seems really weird not to know that stuff. I just think it is so important to know where your food comes from when you buy it at the grocery store.”

Johnson thinks education about agriculture is necessary for kids at every level–primary, secondary and even higher education.

“The ‘Food World Crops’ class I took last fall really opened my eyes about how much most people don’t know about farming,” said Johnson. “A lot of people struggled with this class. No one ever informed them what a wheat plant looks like or a corn plant–I think basics like that are very important for people to know. I want people to understand when they are reading a food label what it’s referring to, and also to be able to really think about the label, and not just trust the box, but to know more. People should ask themselves what does ‘whole grain’ really mean in the brand name of a food. Even though farmers here have gone far beyond subsistence farming and are often commercially successful, it’s still important to appreciate the work that farmers do and how we all benefit from it.”

A part of being an Agvocate is taking an active part in social media advocacy for agriculture. Johnson started a new Facebook page, ‘Ag News by Farmgirl’ to help attract attention to agriculture and spread information about farming. In the first couple of days she had 36 Facebook fans for the page, and by the end of a week it was 100.

“I hope it continues to build during my whole college career and that maybe I will continue it or hand it on to other people as a successful site for reaching the public with information about real farmers and the work they do,” said Johnson.

One of the key opportunities of the Agvocates program is the chance to meet other young, enthusiastic agriculture supporters and leaders. Later in June, Johnson and the other MCGA Agvocates will take part in the Minnesota Agricultural Ambassadors Institute–an annual gathering put together by Minnesota Pork Producers to help cultivate young agriculture leaders–will take place in Willmar.

Johnson is keenly aware of agriculture as an ongoing culture, handed from one generation to the next. Her summer job the past few summers at a local nursing home fits perfectly into Johnson’s view of the social value of the farming way of life. Many of her charges are folks who have been her neighbors, retired from farming, many of them still very interested in the doings in the old neighborhood. Johnson is able to keep her friends at the nursing home up with the specifics and the latest news about the farm places that these folks have lovingly placed into the hands of today’s farmers.

How can America achieve greater energy independence?

(an ‘other voices’ feature by Jason Hill, in the Star Tribune newspaper)

In the long term, renewable electricity and next-generation biofuels from nonfood sources hold the most promise for reducing our dependence on foreign oil. At the same time, more fuel-efficient vehicles, as mandated by government standards, will help reduce overall fuel demand.

Yet widely available electric vehicles and next-generation biofuels are years off, and major gains in vehicle efficiency are unlikely to be seen right away because it currently takes nearly two decades for our national automobile fleet to turn over completely.

Yet, our immediate concerns are pressing. Rising oil prices threaten to derail our economic recovery.

The path we have taken so far to reducing dependence on foreign oil — producing more ethanol — has been largely ineffective. It has also come at great cost to another thing we hold dear — food security.

We now use 40 percent of the corn we grow here in the United States for ethanol, but this is only enough to offset a little under 4 percent of our transportation needs. Last week corn hit an all-time high price of nearly $8 per bushel.

What if, instead of trying to grow our way out of our foreign oil dependence, we were to accelerate our need for less?

Amazingly, simply by increasing the average fuel efficiency of the cars and trucks we drive from 20 to 21 miles per gallon we could offset an amount of gasoline nearly equal to the 13 billion gallons of ethanol we are on track to produce in the country this year.

Americans support corn ethanol through a variety of state and federal mandates, as well as with a 45-cent-per-gallon tax credit.

Our Take:
Beware simple solutions to complex problems. The first ‘Cash for Clunkers’ program was an economic disaster that instantly devalued the entire fleet of American used cars. Used car inventories are a significant source of revenue for car dealers across the country. The Twin Cities and many other locales saw a raft of auto dealers go bankrupt. It was the last straw in the midst of an economically difficult time.

As to ethanol’s effectiveness–it replaces ten percent of the nation’s gasoline. Hill must be including diesel in his calculations, which, with better incentives (Congress zeroed out the biodiesel tax credit) and mandates could be offset by quite a bit more biodiesel. These are solutions available today, and not in some misty tomorrow. What is required is the gumption to pass and maintain laws that actively take apart the century-old monopoly of gasoline on our transportation system.

Next generation, farm-based ethanol is almost here. It promises to double the bite that renewable fuels take out of Big Oil, and the way to ensure that can happen is two things: keep the ethanol incentive–it will encourage the build out of cellulose ethanol now that grain ethanol has reached its maximum capacity. Secondly, put a blender pump in every gas station in America. Such pumps are capable of blending ethanol at various higher graduated levels and give the consumer the choice of how much ethanol and how much gasoline to use. They can choose on price alone, or they can choose based on the benefit to air quality, or the benefit of buying something made in America, or they can choose the amount of ethanol based on the clear demonstration by Indy Racing (where E100 is used) and NASCAR (where E15 is used) that ethanol is actually, despite everything Hill and company assert, a high performance fuel, adding oxygen and octane that equals power. Talk to someone who uses an E85-powered pickup about the difference in torque when they are towing a trailer.

Those two things alongside Detroit’s promise to ramp up flexible fuel vehicle production, will lay the groundwork for steadily weaning ourselves from the oil that Hill rightly blames for nearly scuttling our economy.

And a word about food security. Corn producers do not want prices that its customers can’t afford to pay–that should be obvious. But corn producers do not set the price. To lay $8 corn at the feet of the ethanol industry is more simple-minded pabulum that reflects zero knowledge of the behavior of the commodity markets over the past five years. Corn has been everywhere between $4 and $8 a bushel while ethanol has been steadily producing billions of gallons of fuel. The legally required minimum use of ethanol is well known and commodity trade analysts incorporate the need for more corn in their reports, and farmers have responded by growing more corn.  Grain ethanol plays a limited role in corn price–why should ethanol alone be sacrificed in an attempt to reduce price? UN and other quasi governmental bodies believe ethanol may exert ten percent of the upward pull on prices. The price of oil and the role of speculators in the commodity markets exerts a far greater role in this inflated price.

And Professor Hill would have us believe we are saving energy by retiring millions of perfectly serviceable vehicles, with all the embodied energy it takes to produce the steel and other materials and assemble them into working vehicles. Either he wants to prove that stupid people don’t have a corner on the stupidity market, or he is putting on the straw boater of Professor Harold Hill and telling us there’s trouble in River City, and the solution is buying new cars that can run on only one fuel–gasoline. Explain how does that help us get off gasoline, again? Must be the “Think” method.

Blogger sums up Republican candidates’ positions on ethanol/energy subsidies

(“2012ers still running on ethanol” published on the weblog, Free Republic)

…Mitt Romney still supports ethanol subsidies. So do Newt Gingrich and Rick Santorum, sort of. And the Republicans still oppose President Barack Obama’s idea of getting rid of subsidies for the oil industry.

The focus on the campaign trail thus far has been on continued federal help for corn-based ethanol – understandable as it remains an important commodity in Iowa, home to the first caucus and official test at the ballot box in the Republican primary.

“It becomes kind of a marker for a broader assessment of somebody’s view of the type of role governments should play,” said Michael Franc, vice president for government studies at the Heritage Foundation. “Every state has its version of ethanol.”

Several of the Republican candidates have told crowds in the Hawkeye State that they want federal help for ethanol to continue – at least to a certain degree – although ex-Utah Gov. Jon Huntsman has said he won’t compete in Iowa as he doesn’t believe in “subsidies that prop up corn, soybeans and ethanol.”

Former Massachusetts Gov. Romney – who finished a disappointing second to Arkansas Gov. Mike Huckabee in Iowa in 2008 – last week reiterated the support he showed for ethanol in that earlier campaign. “I support the subsidy of ethanol. I believe ethanol is an important part of our energy solution in this country,” Romney said.

Pawlenty garnered much attention calling for a gradual scaling back of federal help for ethanol at the official kick off of his campaign for the White House last month.

“We need to phase out subsidies across all sources of energy and all industries, including ethanol,” the former Minnesota governor said. “We simply can’t afford them anymore.” He added: “We need to do it gradually. We need to do it fairly. But we need to do it.”

Some conservatives praised Pawlenty for boldly shifting from policies he implemented to help the ethanol industry as a farm-state governor.

But Pawlenty’s new position isn’t that radical a shift – it’s lockstep with that of an industry that recognizes it needs to stay ahead of more aggressive attempts to repeal federal incentives. Ethanol backers are trying to piece together their own proposal to wean off of a 45-cent per-barrel blender tax credit for ethanol and move on to get federal help for setting up flex-fuel gas pumps and other infrastructure to increase market availability.

Former House Speaker Gingrich has said he supported ethanol subsidies as early as 1984 and says he would rather have money going to farmers and others in the United States that produce biofuels than to unstable regimes in the Middle East.

Gingrich – who earlier this year reportedly chided “big city” critics of ethanol – said a federal mandate allowing all cars to be flex-fueled vehicles could supplant the per-barrel blender tax credit.

Santorum, the former senator from Pennsylvania, wants to phase-down the blender tax credit over five years and then help provide infrastructure for flex- fueling stations.

Huntsman nebulously noted in a Wall Street Journal op-ed last Wednesday about the “opportunity to reduce, reform and in some cases end government programs – including some popular but unaffordable subsidies for agriculture and energy – in order to save the trillions, not billions, necessary to make possible a future as bright as our past.”

Huntsman’s refusal to compete in Iowa, which he confirmed to ABC News, is reminiscent of 2008 GOP presidential nominee Sen. John McCain, who is a strong critic of ethanol subsidies and essentially ignored the Iowa caucus in 2008. McCain finished fourth in the caucus that year.

GOP energy strategist Mike McKenna – a vocal opponent of energy subsidies – said some of the leading candidates are “kind of playing footsie with the issue.”

But former Alaska Gov. Sarah Palin – who has not announced plans to make a White House run in 2012 – may have more closely laid out the tea party marker. Responding to a question about ethanol, she told reporters last Tuesday that “all of our energy subsidies need to be relooked at today and eliminated.”

Our Take:
This run down is helpful, if you want to communicate your views with particular candidates or sort among their positions.

We find the point that “every state has its version of ethanol” to be even more meaningful than the Heritage Foundation scholar perhaps intended. While Franc might have simply meant that each place has its sacred cows or its acid test for candidates, understanding what is important to the other is the most fundamental basis for politics.

One method for getting beyond the negative focus on ethanol subsidies is to try to understand the vital interests of other regions of the country and to build common cause on that basis. Call it horse trading or log rolling or just politics, but communicating the idea that ethanol is a huge job builder and economic development mechanism for the Farm Belt we can inquire of others what they feel can build their regional economies most forcefully and work together to support economic development broadly, and so win support for this vital interest of ours.

To view the full weblog posting, or to respond, go to

http://freerepublic.com/focus/f-news/2729952/posts

Sophomore U of M student shares her passion for agriculture

Some say the biggest crisis facing farming is that 98.5 percent of the public don’t farm and most of those people have no connection at all with agriculture, even though they depend on its products every day of their lives.

That’s where Kelsey Gunderson, a sophomore at the University of Minnesota studying agricultural education and specializing in leadership and communications, comes in.

Gunderson, along with fellow college students Leah Joy Johnson and Greg Tusa, has taken up the banner of agriculture as an MCGA Agvocate–an agriculture ambassador to the general public, especially to college-age and young people. The three students have agreed to communicate about farming over the next 12 months over social media and at public events, to help connect people to the farmers and the agriculture that they depend on. In exchange, the three Agvocates each earn a college scholarship and take part in leadership skills development and network building that will help them build a foundation for their careers in 21st century American agribusiness.

When it comes to talking farming, keeping it simple and starting with the basics can be a very successful strategy.

Kelsey Gunderson’s first communication to the public as an MCGA Agvocate was to send a compact electronic message, known as a tweet, via Twitter. (You can find her on Twitter by the handle ‘AVoiceofAg’. The limit of 140 characters in Twitter messages are both a challenge and a virtue. It forces the communicator to boil things down to the essentials.

Gunderson said, “I tweeted a definition of agriculture: ‘Agriculture is the science, art, or occupation concerned with cultivating land, raising crops, and feeding, breeding, and raising livestock’…it may sound obvious, but so many students I meet, when I tell them I am studying agriculture they really don’t know what that is.”

Gunderson comes from Raymond, Minnesota, where she grew up on a farm in a family of three kids. That experience provided a well-rounded picture of agriculture today: her family’s farm includes a farrow-to-finish swine operation, they milk 44 head of cattle, and they raise 800 acres of crops, mostly for silage and feed, but also some of their row crop product is for market. They grow corn, soybeans and alfalfa, as well as a small plot of wheat.

Gunderson is no stranger to public speaking, having taken an active role in 4H and FFA as a teen. The wheat grown on the family farm makes a good symbol of Gunderson’s interest in sharing her passion for agriculture. The family takes part in an antique threshing show in October where people demonstrate how farming was done with authentic 19th and early 20th century farm equipment. She has gotten used to showing the equipment and telling young people in an engaging way about how farming is done. The threshing show is also a vehicle for caring for the world. Through a church mission group, the threshing show raises money to fund farming education and assistance for communities in Africa.

Gunderson relishes opportunities to hone her communication skills. Since meeting the eminent agriculture advocate Michele Payn-Knoper last fall, Gunderson has set her career sights on becoming just such an advocate.

“That’s one of the things that really excites me about the Agvocates program,” said Gunderson. “I’m looking forward to opportunities to meet with major leaders in the ag world, and also meeting the public to spread the word about agriculture. I like to talk, and I like to use my communications skills to help other people know about agriculture. It’s a story I never get tired of telling–that the world couldn’t do without what farmers provide.”

Payn-Knoper conducts a very well subscribed ‘agchat’ every Tuesday via Twitter, ranging over a variety of topics and helping the network of farm supporters build its sense of community and create a vital flow of information. Payn-Knoper uses ‘tweets’ to create traffic to her web log. MPK, as she is known to her web fans, uses hash marks to direct her ‘tweets’ to audiences that will be interested. For instance when she is blogging about nutrition and how farmers focus on producing nutritious food, she includes the hash tag #mom in her message. Everyone searching Twitter on the topic of ‘moms’ will see her message and be able to click on a link that brings the viewer right to MPK’s site, “Cause Matters.”

Gunderson is picking up all these tricks of the trade, in order to become an effective advocate for farming. She has already found for herself that using social media–Twitter, Facebook and the internet as a whole–provides a rich environment for cultivating awareness of farming. Even in the stream of ‘tweets’ Gunderson is building her base of knowledge and researching different aspects of the agriculture industry, which she can turn around and share.