Growers make the case for passing a new farm bill, and keeping RFS

Written by Jonathan Eisenthal

NCGA Corn Congress, held in Washington DC in July each year, is always an occasion for Minnesota growers to meet legislators and continue the conversation about what will help midwestern farmers keep the American system of raising food the envy of the world: an overwhelmingly safe supply of food available in every region at reasonable prices.

The two political issues that will impact U.S. food production the most in 2012 are a successful conclusion to the drive to pass a Farm Bill, and one of the chief agenda items for corn growers and ethanol producers–keeping the Renewable Fuels Standard intact, and allowing its built-in mechanisms to deal with issues of grain supply.

The 17 Minnesota growers met with the entire Minnesota delegate to Congress, as well as many members of the House Agriculture Committee.

“We told congress members we need to keep the RFS intact, let it work, it’s got provisions designed to handle scenarios like this,” said John Mages, a corn producer in Belgrade, Minnesota, and president of Minnesota Corn Growers Association. “RFS demands that so much ethanol be used each year. It’s important to remember that, at the beginning of the year, there was a lot of ethanol in surplus, also there is a credit called RINs (Renewable Identification Numbers) that the fuel blenders can use in the place of actual ethanol. Between those things we may be able to meet all the market demand. It’s important also to wait and see exactly how much corn we produce before the government resorts to drastic changes. One message we’ve been bringing to lawmakers is that once there’s a cut back on the mandate, it will be very hard to get back what’s been given it up. So we want to keep it going.”

Among those new to the process of visiting congress people in Washington and carrying the farmer message, were MCGA director Les Anderson and Anna Bellin, MCGA’s new policy director.

“Our message was straightforward,” said Bellin. “We want to get it done. Don’t mess with the RFS, because the market is working. It is easy to blame ethanol for the problems being caused by the drought, but we should be careful not to take apart energy policy that’s just beginning to deliver energy independence–let’s see what the actual corn production is.”

The grower leaders found the lawmakers receptive and supportive of the idea of getting a farm bill passed this year. The Senate has passed a version and now it is up to the House of Representatives.

The whole thing gets tied up in election year politics,” said Bellin. “Members of the ag committee were generally supportive of getting it done, but it comes down to being a leadership decision. A large part of the farm bill is nutrition program spending and that’s getting all tied up in debates about budget cutting.”

Whatever else gets done regarding farm policy, it appears likely that some kind of disaster program for livestock producers will pass, either as part of a regular farm bill, or failing that, as a stand alone extension.

But the farm program is an essential element — without it, farmers cannot plan for the coming crop year.

“Without a farm bill in place I don’t know a single banker that would make a loan to a farmer,” said Lori Feltis, a producer in Stewartville and a representative to the Minnesota Corn Research & Promotion Council.

However, success will require an eye to timing.

“It was our effort during our Washington visit to put as much pressure on the House to get it done as we could,” Bellin said. “Congressman Collin Peterson has been extremely supportive of getting it done. He is doing whatever he can to get it across the finish line and we really appreciate it. It’s our intent to keep the pressure on, but there’s also a delicate balance–while we are trying to get it done as quickly as possible, we also want to make sure the votes are there when it comes to a vote.”

#farmbillnow: NCGA launches Twitter campaign to speed a successful conclusion to 2012 Farm Bill debates

Written by Jonathan Eisenthal

Farmers rose up this spring and used Twitter to thwart bad government policy.

By sending the short text messages via the Internet-based service Twitter, farmers conveyed their displeasure with proposed farm child labor rules they felt would mean an end to time honored participation of young children in farm chores and adolescents in the operation of basic farm machinery. The ability of children to participate this way is a staple of farm life. The government responded to the barrage of messages by withdrawing the proposal. It was a spontaneous, grassroots reaction.

National Corn Growers Association, known for its culture of engaging grassroots political activism, launched a campaign recently on Twitter, asking farmers to “tweet” — as Twitter messages are referred to — in favor of passing the Farm Bill offered in the Senate.

“We need a farm bill now, not in the fall, not by the end of December, but now–farmers will begin shortly to make critical decisions for the next crop year, and not having a farm bill in place leaves too much uncertainty,” said Janice Walters, communications manager for NCGA’s Washington, DC office. She goes by the Twitter username @DCcorngal and she encourages anyone interested in the farm bill to follow her in order to get the latest news. She said, “Even an extension leaves too much uncertainty while it funds programs that aren’t working well for us, like direct payments.”

American Farm Bureau, American Soybean Association and National Wheat Growers Association have joined NCGA in this Twitter campaign.

By including the 12 characters #farmbillnow in the 140 character message, the “tweet” is channeled to any Twitter user who searches using this set of characters, known as a hashtag. Within hours of the announcement of the campaign, farmers were sending messages with this hashtag, and Senators had begun incorporating it in their “tweets” on the Farm Bill, said Walters.

She said Twitter can be an effective tool for lobbying Congress because over 460 of the 535 members of Congress now have Twitter accounts.

Walters quoted Chuck Grassley, who has been in the forefront in adopting Twitter as a means to communicate quickly with his constituents. He was quoted in Agri-Pulse, saying: “I use Twitter to keep in touch with Iowans. It’s a way to describe what I’m working on as their U.S. senator, to make a point in a public policy debate and to try to foster greater citizen participation in the process of representative government.”

The #farmbillnow outreach effort encourages farmers to include in their message that farming is an economic powerhouse that supports 16 million American jobs, and serves to even up America’s trade imbalance with the world, Walters said. Another key “Tweeting” point: the bill drafted by the Senate Agriculture committee offers $23 billion dollars in cuts over the next ten years, compared to the current farm bill.

“We want members of Congress to know the kind of fiscal restraint and fiscal leadership farmers approve of–it’s the way we run our businesses and our household budgets and we think government needs to operate the same way,” said Walters.

NCGA felt it was a fortuitous time to launch the campaign because the Senate voted 90-8 to “invoke cloture” — the technical measure required to open debate on any bill. Very shortly, Senators will begin debating the bill and introducing amendments, and with the help of the encouragement through #farmbillnow, NCGA leaders hope Congress can pass the Farm Bill before its summer recess.

The four main ingredients for a successful Farm Bill

Written by Jonathan Eisenthal

Corn growers in Minnesota will need four ingredients in the next Farm Bill, according to testimony John Mages gave at a House Agriculture Committee Farm Bill hearing on Friday, March 23 in Galesburg, Illinois.

First, timing is crucial. Farmers need a full five-year Farm Bill this year, in order to plan for the growth in production that the world food market demands. To prosper and remain competitive in today’s global economy, farmers need a safety net in place to protect against periods of low commodity prices.

A successful farm bill will have to offer choices for the type of risk management producers prefer, according to Mages, who farms corn and soybeans in Belgrade, Minnesota. While one choice will work best for corn growers, rice and cotton growers may need a different arrangement geared towards the specifics of production and marketing those products.

Mages made a plea to “not harm crop insurance” nor to make further changes in payment limits–those limits were lowered two years ago and farmers would like to see them stay put, Mages said.

This was the second of four planned House Ag Committee Farm Bill listening sessions to take place through March and April. Chairman Frank Lucas (R-Oklahoma) presided with four other members of the committee in attendance. They took testimony from ten farmers who produce corn, rice, soybeans, wheat, sorghum, specialty crops and beef. 

On the Senate side, Senator Amy Klobuchar (D-Minnesota) held Farm Bill listening sessions in nine locations across Minnesota this past week. Klobuchar is a member of the Senate Agriculture, Nutrition and Forestry Committee.

The Galesburg, Illinois listening session gathered testimony from two panels of farmers:

Panel I
Mr. David C. Erickson, corn and soybean producer, Altona, Illinois
Mrs. Deborah L. Moore, corn, soybean, and beef producer, Roseville, Illinois
Mr. John Mages, corn and soybean producer, Belgrade, Minnesota
Mr. Blake Gerard, rice, soybean, wheat, and corn producer, McClure, Illinois
Mr. Craig Adams, corn, soybean, wheat, hay, and beef producer, Leesburg, Ohio

Panel II
Mr. John Williams, sorghum, corn, wheat, and soybean producer, McLeansboro, Illinois
Mr. Gary Asay, pork, corn, and soybean producer, Osco, Illinois
Mr. Terry Davis, corn and soybean producer, Roseville, Illinois
Mr. David W. Howell, corn, soybean, pumpkin, and tomato producer, Middletown, Indiana
Ms. Jane A. Weber, specialty crop producer, Bettendorf, Iowa

The next House Ag Committee field hearing will take place Friday, April 20, 2012 at  9:00 a.m. CDT at the Magouirk Conference Center (4100 W. Comanche, Dodge City, KS 67801).

There’s no time like the present for the Farm Bill to blossom

 Written by Jonathan Eisenthal

A group of Minnesota farmers visited Washington last week and the luck of perfect timing was with them–the all too brief yearly arrival of the storied cherry blossoms lent their beauty to the avenues of the capital. The group took it as a hopeful sign that the luck of good timing might extend to the quest for a new Farm Bill, which people across the Farm Belt regard as something that will find a better resolution the sooner it comes to fruition.

In the course of two-and-a-half days, the delegation made the rounds and visited with more than a hundred legislators who fill key positions when it comes to setting agriculture policy. Minnesota corn farmers Greg Schwarz, John Mages, Noah Hultgren, Tom Haag and DeVonna Zeug were joined by Elizabeth Tanner, MCGA director of government relations and strategic relationships.

The Minnesota group joined forces with members of the Southwest Council of Agribusiness–farmers and business people from Texas, Oklahoma, Colorado and New Mexico brought together with MCGA by the advocacy firm employed by both groups, Combest-Sell Associates.

“This partnership with Southwest Council of Agribusiness (SWCA) is a great asset,” said John Mages, a farmer in Belgrade (Stearns County) who serves as president of Minnesota Corn Growers Association. “We go in together into senators’ and congress members’ offices and they are impressed when they see us working together, representing so many different groups within agriculture, all of us seeking the same thing–a farm bill that gives us options and protects crop insurance.”

Southwest Council of Agribusiness includes mainstreet ag businesses like farm implement dealers and banks, along with commodity groups for rice, cotton, sorghum, and corn.

“We have a lot more in common–Minnesota farmers and southwest farmers–than people tend to believe,” observed DeVonna Zeug, a farmer in Walnut Grove and past president of MCGA. “Our main goal for the farm bill is to make sure we have one that has options, and one in which crop insurance is safe. We presented a Farm Bill concept to the Super Committee (for Deficit Reduction) last fall that offered a cut of $23 billion over ten years, and now we’re being asked to make even steeper cuts in the budget proposed by Congressman Ryan–$33 billion over ten years. It’s so important for farmers to get in and tell our stories to the legislators, to make the case for what we need.”

Mages noted that for two of the Minnesota group–Tom Haag of Eden Valley and Noah Hultgren of Willmar–this was a first taste of this kind of intense lobbying.

“It was a good experience for them to have,” said Mages. “This is where you can really make your leadership count.”

The group visited key members of agriculture committees in both chambers, as well as transportation, ways and means and others committees central to the farm bill process.

“Some (lawmakers) were bleak, some were more positive about the chances of getting a Farm Bill done this year,” said Zeug. “The Senate will get its version done first and hopefully they will have a good enough bill to go to House. They are thinking it might not come in until lame duck (after the November elections, but before new officials take office). An extension is possible, but no one really wants to do that–we will if we have to.”

The arrival of growing season–a solid winter crop season–makes a timely farm bill even more pressing for the delegation from the southwest.

“Coming from a lenders perspective in Texas, they start planting wheat in September, and decisions need to be made,” Zeug reported. “They need something to go on and if there isn’t a farm bill they get very skeptical and nervous about how the political process will affect their farmers.”

Corn Congress–the annual Washington meeting of National Corn Growers Association in July, is the next time Minnesota farmers will have an in-person opportunity to encourage further development of the Farm Bill.

“It was a very successful week, we covered a lot of ground,” said Mages.

“We strengthened the relationships with these other farm groups, which over the long haul is going to help us keep agriculture strong everywhere in America,” said Zeug.

MCGA growers join the voices of farm leaders from around America calling for a farm bill this year

Written by Jonathan Eisenthal

Commodity Classic 2012 included the annual resolutions meeting of National Corn Growers Association where the most important and unified message was a call to congress to produce a new farm bill this year and not just an extension of the current farm bill. Record attendance at the farm convention and trade show, held this year in Nashville, was well over 5,000 people.

Minnesota brought the third largest state delegation to the NCGA resolutions meeting, with 15 representatives and four alternates. State organizations are allotted delegate seats according to a calculation based on total number of corn acres in the state, the number of members in the state organization, and the state’s dollar contribution to NCGA.

“We would like to see the Farm Bill get done before the elections this year,” said John Mages, a farmer in Belgrade, Minnesota, who serves as president of MCGA. Mages was a delegate at the NCGA resolutions meeting. He said, “There’s a better chance of getting a good farm bill that provides an adequate safety net if we get it done now, rather than waiting.”

Garry Niemeyer, an Illinois corn producer, and president of National Corn Growers Association, joined leaders of national wheat, soybeans and sorghum groups and released a joint statement representing the views of tens of thousands of American farmers regarding the Farm Bill:

“Commodity Classic provides our organizations an opportunity to come together to discuss important policy issues facing our industry.  As Congress continues work on the next farm bill, our organizations agree that an affordable crop insurance program is our No. 1 priority.  We also stand ready to work with House and Senate Ag Committee leaders to create farm programs that provide risk-management tools to growers when they are facing a loss beyond their control.” 

The four national farm commodity groups–corn, soybeans, wheat and sorghum– represent 70 percent of the farm acreage in the United States. The groups acknowledged the current efforts to reduce the federal budget and pledged to work with Congress to develop a very cost effective program:

The joint statement continued, “We urge Congress to pass a new farm bill this year to provide the level of certainty in America that a short-term extension cannot. The nation is currently facing record high federal deficits and this requires difficult decisions.  We stand ready to do our part to develop more efficient farm policy that will be responsive to taxpayers and effective in helping farms remain viable and productive.”

The NCGA resolutions meeting is a chance for the grassroots membership from across the country to help shape the policy directives for the coming year. Minnesota contributed a resolution regarding water management.

“We brought a resolution in supporting water management through irrigation and tiling,” said Mages. “We want to let the government and elected officials now that these management tools are key to the farmer’s protection of resources, and efficient use of nutrients.”

Minnesota also presented a resolution in favor of expediting the necessary investigations that would lay the groundwork for adoption of higher ethanol blends as accepted, EPA regulated fuels.

“We believe that down the road, as CAFE standards rise and require higher mileage efficiency, auto engineers will find that ethanol can be part of the solution for providing higher octane and higher mileage.”

Peterson says uncertainty is only certainty for next farm bill right now

‘Sequestration’–the across-the-board deficit cutting option may work out the best for Ag

Written by Jonathan Eisenthal

Rep. Collin Peterson (D-7th District, MN) opened the 2011 Minnesota Agricultural Leadership Conference last week with a survey of the political landscape in Washington, DC. Congress, like the country it represents, is utterly polarized, he said.

The prospects for the 2012 Farm Bill became the focus of the talk, of great interest to this gathering of leaders of commodity and farm organizations, agricultural business representatives, political advocates, government officials and academics.

This was the second annual Minnesota Agricultural Leadership Conference, organized by the Minnesota Corn Growers Association and drawing leaders from Minnesota Farm Bureau, Minnesota Farmers Union, Minnesota Soybean Growers Association, Minnesota Pork Producers and Minnesota State Cattlemen’s Association, among others, along with representatives of Rice, Cotton and other commodity and agricultural advocacy groups from around the nation. The gathering took place in Brainerd, Minnesota.

Peterson said the negotiations surrounding the next federal budget and the reduction of the federal deficit will impact every aspect of government, including agricultural programs. As ranking (minority) member of the House Agriculture Committee and formerly its chairman, Peterson is in a position to know how agricultural programs will be affected.

President Obama and the Republican leaders made a stop-gap compromise: a super committee has been drafted to come up with a budget that will cut between $1.2 and $1.5 trillion dollars from the deficit. Agriculture, like other ‘jurisdictional’ committees, will lobby the super committee with ideas about what to cut (and what not to). The super committee has to make a formal announcement of its budget plan by November 23. Failing that, automatic, across the board cuts, known as “sequestration”, will go into effect.

“Sequestration may be the best outcome for agriculture,” Peterson told the group.

“The latest figure we’ve heard for sequestration is nine percent,” Peterson said. “The baseline for (farm support spending) is about $210 billion over ten years so that comes out to an $18 billion cut. That’s a lot less than figures we’ve heard from other plans, like $34 billion, or $49 billion in the Ryan Budget.”

House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, released a budget proposal in April that claimed to find $6 trillion dollars in deficit reducing cuts.

Peterson noted that Congress is completely divided about how to solve the deficit–one side wanting to raise taxes, the other wanting to cut spending–and neither side shows any interest in compromise. In such an environment, Peterson said it is extremely unlikely that the super committee charged with finding the cuts, will be able to find anything that could pass Congress. Therefore, sequestration is the likeliest outcome, he said.

“I could solve the budget problem tomorrow,” Peterson told the crowd. “All we have to do is shut down the EPA for two years.”

This statement generated big applause. Numerous farm leaders over the course of the two-day conference referred to unreasonable environmental regulations as one of the greatest threats to independent family farming right now.

Beyond the unlikely event that Peterson can succeed in efforts to limit the scope of the EPA and cut its budget, he expressed support for a strong crop insurance program no matter what shape the next farm bill may take.

Important changes to crop insurance that resulted in major budget savings ($12 Billion dollars by some calculations) were accomplished under the 2008 farm bill, and Peterson said it is important to evaluate how all those changes impacted the system and to make further changes that will bring more crops under the umbrella of crop insurance and increase farmer participation. Peterson believes that, of all the options, crop insurance is the most politically acceptable form of government support that can be promised to farmers.

Corn Congress asks US lawmakers to preserve farm safety net

Written by Jonathan Eisenthal

Before the president and Congress resolve the national budget crisis, the number of dollars available for the US Farm Program is unknown and therefore getting down to specifics doesn’t make a lot of sense.

But scores of farm leaders, who came to Washington D.C. to participate in the National Corn Growers Association Corn Congress, delivered a general message: to the extent possible, preserve the farm safety net.

Cutting the farm program, which amounts to a quarter of one percent of the national budget, would amount to little more than a paper budget victory. “Disaster” bills and other ad hoc reactions put together when the crisis hits spend more money and are not as effective.

Corn Congress took care of important organizational business Wednesday. The 124 delegates–farmers from across the 28 corn growing states– elected five growers to the National Corn Growers Association board of directors for the 2012 fiscal year, which starts October 1: Chip Bowling of Maryland, Martin Barbre of Illinois, Lynn Chrisp of Nebraska, Bob Bowman of Iowa and Keith Alverson of South Dakota.

Each state’s group of delegates spent time on Wednesday and Thursday meeting with their state’s members of Congress.

“We delivered our message that crop insurance–protecting risk management at the individual farm level– is the most valuable part of farm program right now for corn farmers,” said Greg Schwarz, a farmer in Le Sueur and president of Minnesota Corn Growers Association. “Secondly, we asked that when Congress puts together the Farm Bill next year, the ACRE program or whatever that may turn into, should provide risk management during broader risks to the farm economy. And third, we asked them to consider some kind of ethanol support. We understand that VEETC (Volumetric Ethanol Excise Tax Credit) is going away. We are supportive of what Senator Klobuchar is trying to do, to get some of that money into infrastructure. We point to the jobs and the economic development value for Minnesota and give our opinion that these are worth preserving. Trying to get money for blender pumps may be the best next move to continue to build ethanol.”

Minnesota grower leaders had face-to-face meetings with Senators Amy Klobuchar and Al Franken and Representatives Collin Peterson and Tim Walz, and met with agriculture liaisons and legislative aides in the offices of the other members of Minnesota’s congressional delegation.

“We especially enjoyed the face time with the senators and representatives themselves–we felt we could really connect and deliver the message for our 6,000 members back home,” said Schwarz. “Tim Walz in particular is so positive all the time, and he’s so in tune with Minnesota’s farmers that he makes all of our talking points for us. There are still some people optimistic that our country and our system will work. It’s a messy system, but ultimately things will work out. Peterson comes at it from another angle. He pulls no punches and gives his frank assessment. That’s a valuable perspective, too. We come away from these meetings with a better sense of where things are headed.”

In addition to Walz’s optimistic message, the grower leaders were happy to hear the presentation of famed NASCAR racer Kenny Wallace at the NCGA reception for Congress members.

“Kenny gave a real “hoorah” speech,” Schwarz said. He reassured everyone that E15, which is being used in NASCAR, is an excellent fuel. There has not been a single engine problem related to using E15 in the national circuit races.”

 

Grassley bill would taper ethanol incentive, and then gear it to price of oil

Rather than forcing the American ethanol industry to give up blending credits abruptly when current funding sunsets, a bill authored by Sen. Chuck Grassley (R-Iowa) would cut the payments by more than half while extending them another two years, after which time the credit would be indexed to the price of oil on the New York Mercantile Exchange. Because ethanol tends to follow the price of oil upward, increases in the price of oil would drop the future ethanol credit stepwise, until it would disappear altogether at the highest price trigger.

In part, this bill answers a bill offered by Senators Dianne Feinstein (D-California) and Tom Coburn (R-Oklahoma) who want to end ethanol subsidies and trade tariffs altogether.

The Grassley legislation would drop the credit from its current level of $0.45 cents per gallon this year, down to $0.20 cents next year. In 2013, it would further reduce the credit to $0.15 cents per gallon. Starting in 2014, the credit would become linked to the price of oil. When oil costs between $50 and $59.99 per barrel the credit would be $0.24 cents. For every ten dollar increment above that, the credit drops by $0.06 cents per gallon, until oil hits $90 dollars a barrel, at which point the credit disappears.

Growth Energy and Renewable Fuels Association have both endorsed the Grassley approach.

“We think it’s a smart policy that allows the industry to evolve while it addresses the budget concerns of some on Capitol Hill,” said Matt Hartwig, a spokesman for the Renewable Fuels Association, an industry group. He added, “The variable credit provides the ethanol market stability against the volatility of oil markets.”

The bill also provides funding to share the cost of installing blender pumps that allow consumers who drive flexible fuel vehicles to choose what level of ethanol they want in their fuel, from 20 to 85 percent.

Sen. Kent Conrad (D-ND) co-sponsored the bill, and Minnesota’s Senators Amy Klobuchar and Al Franken, also Democrats, have endorsed the legislation.

Green Acres clarification ensures law’s usefulness in protecting farmland

Written by Jonathan Eisenthal

Modifications to the law known as the Green Acres law will help to maintain its usefulness in preserving farmland on the edges of Minnesota’s metropolitan areas, which have faced development pressure and taxation policies that led to the loss of agricultural acres. The changes were recently passed by the Minnesota legislature and signed into law by Gov. Dayton.

“I farm with two brothers, and we’ve utilized Green Acres for years for our land in Rice County. Dakota County has also made use of Green Acres for years, but it is a county-by-county thing and each county has its own particular set of issues, each county has a unique makeup in its tax base and that influences these policies,” said Bruce Peterson, who farms in rural Northfield, and serves as a director on Minnesota Corn Growers Association board. Peterson has followed the developments in the Green Acres amendments, as a member of MCGA’s government relations committee.

Peterson noted that development pressure has slowed down, and so have tax savings realized through Green Acres.

“But go a few years down the road and the housing market returns to a faster pace and you could easily get back to that kind of pressure,” said Peterson. “Five, ten years down the road, this could save us money again, so it’s good to have it in place.”

At the height of urban edge land development in the mid2000s, some farmers with land closer to the core participated in “IRS-1031” exchanges in order to take advantage of the worth of the land to residential and commercial developers. They sold such parcels and did so without undue tax liability because, under 1031, the proceeds can be used in the purchase of commensurate property–the farm producers were able to purchase more acreage by going farther out from the urban core.

Elizabeth Tanner, director of advocacy and strategic partnerships for MCGA, explained the changes to Green Acres: “The new law clarifies that the purpose of the program is to preserve farmland by mitigating the property tax impact of increasing land values due to nonagricultural economic forces….also, though it keeps the Rural Preserve program for class 2b land, it eliminates the requirements for landowners to sign a minimum 8-year covenant pledging the land will remain unfarmed and for landowners to prepare a conservation assessment plan.”

Though this didn’t go as far as was suggested in MCGA resolutions, it does refocus the law to its original intent and allow other conservation programs to cover land conservation in a way that makes sense for farm operations.

“The real estate market has calmed down for now, but it’s good to have Green Acres in place,” said Peterson. “The cost of land is still going up for farmers, but it’s the price of corn and beans that’s driving it, rather than home values, and that’s the way it ought to be for Minnesota’s croplands.”

How much Corn would we grow if not for ethanol?

Since production is tailored to demand, the critics don’t want more food, they want less corn

Our Take:
C. Ford Runge is at it again, spreading his pretense as far as Brisbane, Australia. An article appearing there Wednesday details Runge’s simple-minded fear-mongering economics as a justification for current Senate legislation (Coburn et al) that would gut the US ethanol program.

Runge, University of Minnesota economics professor, pretends that the amount of corn we grow is fixed, and that we are now allotting more to ethanol, taking it away from the use of corn to produce food.

To answer Runge’s charge in his own rhetorical style, you don’t have to have a PhD in economics to know that without ethanol, less corn would be produced. We’d still grow the same amount demanded by the feed and export (for animal feed) markets. It would take less corn to satisfy demand if not for ethanol. And that is what Runge, and Senators Coburn and Cardin are really after. They don’t care about hungry people. If they did then they would know the way to feed them is to ensure the profitability of farming–that is the only incentive that guarantees that America will produce as much food as it can.

It’s a very predictable method of attack. Take away the ethanol tax credit and reduce the number of ethanol producers. The ones remaining will charge more for their product which will be in high demand thanks to the renewable fuels standard. And then the Big Oil lobby will complain about the onerous cost of ethanol, point to the high gasoline prices the Oil industry has engineered and deliver to a compliant US Congress the perfect alibi to do away with the ethanol requirement altogther. We’ll be back to mainlining oil.

The oil producers in Coburn’s home state of Oklahoma can go back to profiteering on the backs of every American driver by enjoying  their monopoly at the pump. We are looking at $4 a gallon for gasoline now. Knock the legs out from under ethanol and you better be ready to try five or six dollars a gallon on for size. That might create a good number of hungry people in America who choose gas for work over food.

Do away with ethanol and Cardin can claim an environmental victory because “out of sight, out of mind.” Rather than bet on American agricultural and renewable energy innovation to continue the trend of reducing environmental impact while increasing yield, Cardin would prefer to outsource both food and energy production.

The part of the economic picture that Runge deliberately brushes aside is that the success of ethanol is a major part of what is inspiring that innovation in crop production. Corn yield has grown right alongside the growth of the ethanol industry. In 1993, farmers brought in 100 bushels per acre. By 2003 that yield had risen to 142 bushels per acre, and in the last few years 150 bushels is the floor. Again, this is no accident. The profitability of ethanol is what is paving the way to this explosion of food productivity.

At this moment seed companies are ready to bring to market varieties of corn and other crops that are more water efficient (drought resistant) and more productive with fewer nutrient inputs than any crops ever grown before. Take away ethanol and prepare to slow down or end this kind of innovation.

Without the market foundation provided by being able to sell part of their crop for energy, a huge number of American crop farmers would not be in business and the rural communities that depend on the prosperity of farmers would dry up and blow away. That is unless we went back to a farm welfare system. Massive government subsidization of crops that cost more to produce than the market would pay for them. Why? Because the system deliberately encouraged overproduction in order to depress prices. A market that knows it can’t possibly use up what it demands will pay a lot less for that product.

And depressing the price for crops consequently depresses the value of land, the prices commanded by all consumer products in the rural economy, and the quality of products offered on Main Street. Ending farm-based energy is a prescription for a downward economic spiral.

Coburn and Runge and Cardin can complain about $6 billion in ethanol subsidies–an investment that generates several multiples in state and federal tax revenue. But doing away with ethanol, we will have to go back to even pricier farm subsidies, which incidentally didn’t do nearly as well as renewable energy to insure economic vitality in the heartland.

In case you want to read the carpings of Runge and company, here is the article that appeared in the April 13 edition of Brisbane Times:

Surging food prices fuel ethanol critics

A surge in global food prices has prompted fresh criticism of US subsidies for ethanol, which diverts massive amounts of corn from global food supplies for energy.

Producers of ethanol argue that the biofuel helps blunt the impact of high imported petroleum prices, but critics say the US policy giving tax breaks for ethanol used in motor fuel ends up being bad for food, energy and the environment.

The issue has created unusual political alliances, with environmental groups and some lawmakers from both parties clashing with farm interests and legislators from the corn-producing midwest states.

Senators Tom Coburn, a Republican from Oklahoma, and Ben Cardin, a Maryland Democrat, introduced a measure last month to scrap the tax credit of 45 cents per gallon for ethanol in gasoline.

“The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy. The $6 billion we waste every year on corporate welfare should instead stay in taxpayers’ pockets where it can be used to spur innovation, stimulate growth and create jobs,” said Coburn.

The lawmakers cited a Government Accountability Office report describing the tax credit as “largely unneeded today to ensure demand for domestic ethanol production.”

C. Ford Runge, a University of Minnesota professor of applied economics and law, argues that ethanol from crops has many “hidden costs” that should dissuade the government from subsidies.

Runge, who raised concerns about ethanol policy as early as 2007, says his research suggests some 30 per cent of food price increases come from diversion of US corn for ethanol.

“If you’re taking 40 per cent of the US corn crop, the largest of any country on earth, and putting it to one use… you don’t have to have a Ph.D in economics to know that’s going to put upward pressure on prices,” he told AFP.

In an essay written for Yale University’s Environment 360 online magazine, Runge cites “strong evidence that growing corn, soybeans, and other food crops to produce ethanol takes a heavy toll on the environment and is hurting the world’s poor through higher food prices”.

The UN’s Food and Agriculture Organization has warned that rising food prices are driving unrest around the world, including recent uprisings in the Middle East and North Africa.

Runge said high food prices – including corn at record highs – are a factor in the unrest, saying “these countries have been subjected to the pressures in their household costs,” adding to the political pressures.

Economist Ed Yardeni at Yardeni Research said diversion of crops to fuel is important because the US provides more than half of global corn exports and over 40 per cent of soybean exports.

“So our ethanol policy is exacerbating the global food fight, destabilizing the Middle East… Is that insane, or what?”,” Yardeni said.

Yet ethanol has its staunch defenders including Senator Tom Harkin the corn-belt state of Iowa, who told a recent hearing that ethanol “has dramatically reduced our need for oil.”

Harkin said the focus on ethanol diverts attention from the oil industry’s “very lucrative and unnecessary subsidies.”

Bob Dinneen, president of the Renewable Fuels Association, said ethanol is important for the goal of energy security, and he dismisses its impact on food prices, saying refiners use only the starch component of feed corn, and produce animal feed as a byproduct.

“Ethanol is the only thing we have today to moderate skyrocketing prices of gasoline and crude oil,” Dinneen said.

“If the chaos in the Middle East teaches us anything, it should be that America must forcefully begin down the path of energy self-reliance. Increasing the use of domestic renewable fuels like ethanol is the first, and arguably, the easiest step we can take,” he said at a congressional hearing.

US President Barack Obama said in a March 30 speech on energy policy that ethanol should be part of the US energy future as part of an expanded effort for biofuels.

He said there is “tremendous promise” in renewable biofuels, “not just ethanol, but biofuels made from things like switchgrass, wood chips, and biomass.”

A White House official said that “corn ethanol is already making a significant contribution to reducing our oil dependence. But going much further will require commercialization of advanced biofuels technologies.”

Dinneen argued the US will need a variety of biofuels, but added “the existing ethanol industry is providing the foundation on which those other biofuels will be able to grow.”

AFP