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Massive Boondoggle of Growing Corn for Ethanol Will Soon Transform the Corn Belt & Recharge GE Corn Industry

  • Corn, Ethanol & C.R.P.
    By Philip Brasher
    The FarmPolicy.com News Summary, 9/8/2006

 http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20060907/BUSINESS01 /609070374/1030 , writing in yesterday's Des Moines Register, reported that, "Farmers must grow more corn in coming years to keep up with the demand for fuel ethanol, the government's top agricultural economist says.

"Farmers would need to plant 90 million acres of corn by 2010  , the U.S. Agriculture Department's chief economist."

"The increase almost equals the total corn acreage in Iowa, where farmers planted 12.7 million acres of corn this year."

(Dr. Collins testified on Wednesday before the Senate Environment and Public Works Committee http://epw.senate.gov/hearing_statements.cfm?id=262529 ).

Mr. Brasher also pointed out that, "The growth in ethanol production could have several ramifications, Collins and others said. It could push corn prices to record levels in coming years, reducing government subsidies but potentially raising food prices. The expansion of corn acreage could reduce soybean supplies and eat up land now set aside for conservation."

The Register went on to report that, "Collins said increases in corn yields will help meet demand for ethanol.

"He also estimated that up to 7 million acres of land now idled under the Conservation Reserve Program http://www.nrcs.usda.gov/programs/crp/  could be planted to corn and soybeans. Most of that land is in Iowa and other Midwestern states.

"About 36 million acres of former cropland, including nearly 2 million in Iowa, is now enrolled in the program.

"OSome of that land can be farmed economically and sustainably,' Collins said."

And near the conclusion of his Register article, Mr. Brasher stated that, "Economists at the University of Missouri's Food and Agricultural Policy Institute http://www.fapri.missouri.edu/  recently estimated that CRP acreage would shrink by a million acres by 2010.

"The economists, who analyze agricultural policy for Congress and federal agencies, estimate farmers will plant 87 million acres of corn by 2010, a 9.6 percent increase over this year."

Peter Shinn http://www.brownfieldnetwork.com/gestalt/go.cfm?objectid=89AE838E-C0B6-C2C9 -9907861523F2D5E8 , writing yesterday at Brownfield, added that, "USDA Chief Economist Keith Collins testified before the Senate Energy Committee Wednesday, telling lawmakers ethanol production will continue to grow in America, and that it will raise corn prices.

"But Collins said higher corn prices won't cut into ethanol production unless they move well above the all-time record high season average price of $3.24 a bushel, which happened in the 1995-96 crop year. Collins said if corn prices do move sharply higher, it could trim U.S. corn exports and hurt livestock profitability. Collins said to prevent that from happening, U.S. farmers have to plant more corn in the years ahead."

Meanwhile, DTN Political Correspondent Jerry Hagstrom (link requires subscription http://www.dtn.com/agriculture.cfm?sidenav=sn_ag_producer&content=ago_t rial ) reported yesterday afternoon that, "Eliminating the Conservation Reserve Program, which pays farmers to keep land idle rather than grow crops on it, would lower corn, wheat and soybean prices and increase government costs in other farm programs by $33 billion between 2007 and 2015, according to a University of Tennessee study http://apacweb.ag.utk.edu/ppap/APAC-CRP-Report.pdf  [PDF] released today by the farm and wildlife groups that sponsored it.

"If the CRP were eliminated and the land were put back in production, the increase in corn, soybean and wheat supplies would cause a drop in prices that would, in turn, trigger higher government marketing loan http://www.ers.usda.gov/Briefing/FarmPolicy/2002malp.htm  and countercyclical payments http://www.ers.usda.gov/Briefing/FarmPolicy/CounterCyclicalPay.htm , Daniel De La Torre Ugarte, associate director of the University of Tennessee Agriculture Policy Analysis Center said in a news release.

"The full elimination of the CRP, which now pays farmers to idle 34.7 million acres of farmland, would save the government $12 billion in CRP payments, but trigger $45 billion in other program payments, resulting in a $33 billion net increase in government costs, De La Torre Ugarte said."

Concluding, Mr. Hagstrom stated in his DTN article that, "The groups that paid for the study are the American Corn Growers Association, Pheasants Forever, The National Farmers Organization, the American Agriculture Movement, the Environmental and Energy Study Institute, the Association of Fish and Wildlife Agencies, the Theodore Roosevelt Conservation Partnership and the Wildlife Management Institute.

"The groups said increasing the size of the CRP to the fully authorized level of 39.2 million acres or even increasing the size of the CRP to 45 million acres would lower government costs and raise farm incomes. If the CRP were increased in size, supplies of commodities would be lower, prices would presumably be higher and government payments lower.

"Almost 80 percent of the CRP land is planted in grass, with the rest in trees or used as buffers, wetlands or wildlife habitat.

"Most of the land in the CRP is in the Plains states, but there are also substantial amounts in Iowa, Colorado and Washington."

A press release http://www.trcp.org/pr_crpreport.aspx  regarding this study, which was issued yesterday by the Theodore Roosevelt Conservation Partnership http://www.trcp.org/default.aspx  (TRCP) and its Agriculture and Wildlife Working Group http://www.trcp.org/aboutAWWG.aspx  (AWWG), included this summary on the C.R.P. program:

"According to U.S. Department of Agriculture statistics:

* More than $1.6 is billion paid in annual CRP rental payments to agricultural producers. * CRP reduces the annual cropland soil loss by about 450 million tons ­ enough to fill approximately 37.5 million dump trucks. * CRP restored 2 million acres of wetlands and adjacent buffers. * CRP protected 170 thousand miles of streams. * CRP sequesters 48 million tons of carbon dioxide annually. * CRP produces 15 million pheasants annually. * CRP supports 2.2 million ducks per year in the Prairie Pothole Region.

"Additional USDA statistics show the following economic benefits thanks to the CRP:

* Soil productivity benefits - $162 million * Hunting migratory waterfowl - $122 million * Reducing runoff from fields - $392 million * Wildlife viewing - $629 million"

In a related news story, Nancy Cole http://www.nwanews.com/story.php?paper=adg&section=Business&storyid =165878  reported yesterday in the Arkansas Democrat Gazette (Northwest Arkansas Edition), that, "Arkansas' corn acreage should rebound in 2007 and 2008, because of declining fertilizer prices and strong corn prices, [Scott Stiles, an extension service economist based in Jonesboro] said.

"OUrea [a nitrogen fertilizer ] is down about 15 percent from 12 months ago... that will help attract some corn acres,' he said.

"And corn prices are good, in part, because of the strong demand for ethanol, which is produced primarily from corn grain.

"OThe marketing advisers like the 2007 and 2008 [corn ] prices, and they're already advising their clients [sell ] 10 to 15 percent of their ' 07 and ' 08 production' through futures contracts, Stiles said.

"Ethanol demand is strong because of record-high oil prices, the replacement of the gasoline additive methyl tertiary butyl ether, or MTBE, with ethanol, a 51-cent-per-gallon federal tax credit for ethanol use and the Energy Policy Act of 2005 's ORenewable Fuel Standard,' which requires that a minimum amount of renewable fuel be sold each year in the United States.

"OIf we get [an ethanol refinery ] in Arkansas, or somewhere close that we could haul corn to, I think that's only going to help us out,' [Jason Kelley, wheat and feed grains agronomist with the University of Arkansas Cooperative Extension Service] said."

In addition, Stu Ellis http://www.farmgate.uiuc.edu/archive/2006/09/corn_soybeans_o.html , writing yesterday at the farm gate blog (University of Illinois Extension), also addressed issues associated with corn demand and conservation.

Specifically, Mr. Ellis stated that, "The Cornbelt farmer in 2007 will be in the middle of a battle for acreage fought among corn, soybean, and conservation interests. There has been a lot said about the market having to buy corn acres to ensure there is enough for ethanol, livestock feed, and exports. But the more acres dedicated to corn means that soybean acreage will decline, unless the soybean market steps in. While that battle has received a lot of attention, there has been little said about conservation acreage, and the USDA may have to increase rental payments to retain CRP acreage in highly erodible land (HEL) areas. For the farmer with expiring CRP acres, how do you decide whether to let your CRP contract expire and shift into crop production? That is the question we'll help you answer today.

"Although CRP acres are scattered throughout the Cornbelt, the vast majority of candidates subject to switching are in Kansas and Nebraska. If you have expiring CRP acreage, what is your decision process for renewal or planting? Kansas State economists Kevin Herbel and Rodney Jones developed a decision aid  http://www.agmanager.info/crops/prodecon/production/decision/CRP%20Decision 2456.xls  [Spreadsheet] to help those producers make a calculated decision."

Concluding, Mr. Ellis stated that, "If demand for commodities shapes up next year as some outlook specialists anticipate, your decision about cropping patterns can mean the difference between profit and loss, and the CRP element sheds a whole new light on the decision. The Kansas State decision aid walks a producer through the economics of the choices, with complete flexibility to make all necessary income and expense adjustments."

Another article relating to corn and ethanol demand was published in today's New York Times, where Andrew Pollack http://select.nytimes.com/mem/tnt.html?tntget=2006/09/08/business/08crop.ht ml&tntemail0=y&emc=tnt&pagewanted=print  began his article with this interesting opening sentence: "More miles to the bushel.

"That is the new mission of crop scientists. In an era of $3-a-gallon gasoline and growing concern about global warming from fossil fuels, seed and biotechnology companies see a big new opportunity in developing corn and other crops tailored for use in ethanol and other biofuels.

"Syngenta, for instance, hopes in 2008 to begin selling a genetically engineered corn designed to help convert itself into ethanol. Each kernel of this self-processing corn contains an enzyme that must otherwise be added separately at the ethanol factory.

"Just last week, DuPont and Bunge announced that their existing joint venture to improve soybeans for food would also start designing beans for biodiesel fuel and other industrial uses.

"And Ceres, a plant genetics company in California, is at work on turning switch grass, a Prairie States native, into an energy crop."

Mr. Pollack added that, "Developing energy crops could mean new applications of genetic engineering, which for years has been aimed at making plants resistant to insects and herbicides, but would now include altering their fundamental structure. One goal, for example, is to reduce the amount of lignin, a substance that gives plants the stiffness to stand upright but interferes with turning a plant's cellulose into ethanol.

"Such prospects are starting to alarm some environmentalists, who worry that altered plants will cross-pollinate in the wild, resulting in forests that practically droop for want of lignin. And some oppose the notion of altering corn to feed the nation's addiction to automobiles."

Meanwhile, Jude Webber http://mwprices.ft.com/custom/ft2-com/html-story.asp?FTsite=FTCOM&guid= %7B232C95F5%2DCA74%2D4DF6%2D8795%2DA3939C4F648D%7D&  reported in yesterday's Financial Times that, "The production of soya, which has dramatically changed the face and fortunes of Argentine agriculture, is now poised to launch a promising new energy industry.

"Dozens of small producers, eyeing a lucrative export market and the prospect of burgeoning domestic demand, are building factories to turn some of Argentina's abundant soya oil into a cheap, renewable fuel for which there is increasing overseas appetite.

"Driven by the introduction of genetically-modified crops into Argentina a decade ago, soya production has rocketed to a record 40m tonnes in the last season, and the country is the world's biggest producer of soya oil ­ a prime raw material to make biodiesel.

"Sugar and cereals are used to make ethanol, which Brazil http://www.ers.usda.gov/Briefing/Brazil/  has turned into a major industry. Currently, almost half Argentina´s exports are derived from farming and 20 percent are direct exports of raw materials, so biofuels ­ which sell for around 70 per cent more than the plain oil ­ represent a way of adding value to abundant output from Argentina´s primary sector," the FT article said.

 

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