I understand just enough about the ongoing legal joustings of ethanol versus big oil to be dangerous.
On the one hand, I think ethanol may be helping keep gas prices down, but now gas prices keep fluctuating from nearly $4 a gallon to below $3.50 today.
I’m in favor of keeping grain prices high enough for farmers to recoup some of their losses from drought and even back to when grain prices weren’t so good.
However, it would be nice to keep prices low enough and for long enough to prevent driving the livestock industry out of the Southeast.
High fuel prices should keep demand for ethanol up and demand for corn good, and subsequently prices should be good. Then again, last time I looked, corn prices were going down as gas prices were going up.
Recently, the American Petroleum Institute and partners decided to appeal the E15 case to the U.S. Supreme Court — now that’s real reason to be optimistic this controversy will end in a way that will somehow help American farmers in general and Southeastern farmers and livestock producers more specifically.
It seems big oil is reluctantly okay with giving up 10 percent of fuel needed to power U.S. vehicles, but not ready to commit to the 15 percent mandated by Congress.
Commenting on the decision to appeal, Bob Dinneen, president and CEO of the Renewable Fuels Association, says “Good luck with that. We now know why gas prices keep going up and up — to fund unnecessary big oil lawsuits to protect their monopoly on the fuel market. I wonder if food prices will spike as well to cover the cost of this Supreme Court challenge?”
I’ve talked to Mr. Dinneen a couple of times and find him to be a reasonable fellow. Certainly, I wouldn’t lump him in with the ‘wild-eyed, spend-crazed liberals’ that he’s sometimes called by the equally irrational extreme right wing conservatives.
Politics being what they are — or how they may be perceived to be, I’m not sure whether the interests of the Renewable Fuels Association and grain growers in the Southeastern U.S. mesh so well with big oil or ethanol.
Ethanol is for sure a good thing for grain farmers in the Midwest. USDA estimates that about 40 percent of this year’s grain crop will go for ethanol production. Some contend the high price of corn, mandated by use as ethanol, is good for all corn growers. That may be true, but in recent reports by the Renewable Fuels Association, it’s clear a vast majority of the profits from ethanol production stay in the Midwest.
The numbers for ethanol production seem staggering when placed beside the demand for corn for Southeastern livestock producers. In the last week in March, ethanol production averaged 805,000 barrels per day (b/d) — or 33.81 million gallons daily. That is down 4,000 b/d from the week before. The four-week average for ethanol production stood at 804,000 b/d for an annualized rate of 12.33 billion gallons.
David and Goliath
If ethanol production sounds like big business, consider the entire U.S. ethanol industry is smaller than Mobile-Exxon, and with significantly fewer resources. Throw in BP and other major oil companies, and it’s easy to see who is David and who is Goliath.
The latest report from the Alternative Energy Association sounds like a good thing for livestock growers. Midwest ethanol plants did indeed produce a lot of DDGS (distiller grain from corn production of ethanol).
The latest report from the ethanol folks says, “On the co-products side, ethanol producers were using 12.206 million bushels of corn to produce ethanol and 89,840 metric tons of livestock feed, 80,093 metric tons of which were distillers grains. The rest is comprised of corn gluten feed and corn gluten meal. Additionally, ethanol producers were providing 4.19 million pounds of corn oil daily.
In the grain deficit Southeast, an additional 90 million tons of livestock feed sounds real good. Real good, that is, until you factor in the cost of getting DDGS to the Southeast and their relative value nutritionally compared to the real thing — corn.
Farmers in the Southeast are heading into the planting season, and some are already there, with more questions about what is most economically promising to plant that at any time recent history, made in all history. For those contemplating corn acres and think the recent dip in price is a strong signal to cut back on corn acreage, consider the market.
American consumers use about 350 million gallons of gasoline a day. As long as the current Federal mandate is in place, ethanol must supply 15 percent of the total amount of gasoline used for transportation. Currently ethanol produces about 9.5 percent of the daily demand.
Unless big oil succeeds in taking down the ethanol mandate, the market for ethanol is going to remain good, hence the demand for corn should remain good and so should the price. If the Federal mandate goes away, and there are some legitimate reasons it should, then all bets are off on corn prices.
What impact does the standoff between ethanol and big oil have on the U.S. congress? One would hope none, but reality seems slanted in an all together different direction.
Corn is big business, and not just big agriculture business in the Midwest. It’s a safe bet that regional alliances, regardless of party affiliation has some negative impact on the ongoing congressional gridlock that currently frustrates a high percentage of tax-paying Americans.
It would be nice if the U.S. Congress could stand together on some important issue — like our food supply, but it’s not likely to happen.
Perhaps Walt Kelly, author of the comic strip Pogo, had the cause of the current political gridlock in Washington D.C. figured out long age. He wrote in the popular cartoon strip, “We have met the enemy and he is us.”
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