Tuesday, November 26, 2013

Will Ethanol Survive on its Merits?

The U.S. Environmental Protection Agency (EPA) recently announced their plan to lower the level of biofuels that must be blended into gasoline and diesel. They will reveal the specific quota this spring, but indications are it will be 15 to 15.52 billion gallons. Compared to 18.15 billion gallons set by Congress in the Energy Independence and Security Act of 2007.

Why does a dairy farmer care about federal biofuel policy? Because this policy has had a significant impact on my dairy farm and thousands of dairy farm families across the country. When Congress decided it was a good idea to mandate the use of corn for fuel, the price of corn, soybeans and other animal feeds, and human food, escalated. This has had a negative impact on my farm and my family. 

These commodity prices started increasing rapidly in 2007

The ethanol mandate consumes 40% of the nations corn crop. Supporters claim this policy saves consumers money. I don't see it. Are they counting all the subsidies and mandates that have cost U.S. taxpayers billions?  Are they considering the fact that this policy has caused Americans to pay as much as $40 billion a year more for food from soft drinks to beef, according to estimates by Texas A&M University researchers? 

Almost all gas sold in the U.S. is E10 which contains up to 10% ethanol mandated by the federal government. Production of renewable fuels has been growing rapidly in recent years. At the same time, advances in vehicle fuel economy and other economic factors have decreased gasoline consumption lower than what was expected when Congress passed Renewable Fuel Standard (RFS) in 2007. As a result, EPA said, “We are now at the E10 blend wall, the point at which the E10 fuel pool is saturated with ethanol”.

I’m thrilled to hear EPA’s recent announcement! The reduction in grain crops being used for biofuels makes food for my cows and my family more affordable. Livestock and poultry farmers who purchase feed have suffered the last several years. Many have gone out of business due to the extremely high price of animal feed. What’s worse is the biofuel industry isn’t a “real” market. It’s been created and propped up with government subsidies and mandates creating a false market that seems afraid to stand on its own. 

The amount of U.S. corn used for ethanol has increased dramatically since 2006

I get frustrated when I read articles and hear reports about how ethanol has created an economic boom for rural America and farm families. This is true if you’re a grain farmer or work at an ethanol plant. But it’s been a horrible nightmare for livestock farmers feeding cows, hogs and chickens.

When this policy was created, the animal sector of agriculture was forgotten. National leaders like the U.S. Secretary of Agriculture, American Farm Bureau President and others seem to dismiss the impact this flawed policy has had on livestock and poultry farms.

If biofuels, including corn ethanol, are viable fuel sources that make economic sense then they will continue. Biofuels should not be mandated or subsidized. The corn ethanol industry must survive or fail on its own merits.    
For more on this topic, check out these two articles:
The Social Silo blog post by Chris Kick "Are grain and ethanol farmers crying over spilled corn? He makes a good point, "I feel for farmers who planted this year’s crop thinking there would be a solid market at year’s end, only to find the rug pulled out from under them. However, I also question why the rug was there in the first place. It is a risky thing when the government mandates the future of our energy sourcing, especially when it’s setting the policy two decades in advance. If ethanol is so great, and saves us all so much money, why can’t the market support it on its own?"

Bloomberg News Editorial "Big oil should win its bid to reduce ethanol in gasoline
The conclusion this writer comes to, "let the market dictate how much ethanol gasoline buyers use". 

Ethanol policy and the dairy producer by Ryan Miltner for Progressive Dairyman Magazine


1 comment:

  1. Thank you for sharing. Great post. It is always educational to see how mandates in an industry effect different branches of that industry, in this case Agriculture and the different industries in it.


Thank you for reading my blog and taking the time to comment! I’m opening the doors of our farm to share with you and enjoy engaging in discussion. Please be respectful in your comments. I reserve the right to remove posts that include name calling, slander, and vulgar language or contain links to websites that assault animal agriculture.

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