COVER STORY : Biofuel for the fire
Posted on Sunday, June 29, 2008
Harvesting billions of bushels of corn to make fuel gives the United States some measure of energy independence from foreign countries, but a growing chorus of food companies and hunger abatement groups say the price is too high.
Earlier this month a coalition of 20 groups representing food manufacturers, Hispanic organizations and advocates for the hungry banded together to lobby Washington lawmakers to freeze the Renewable Fuel Standard program. The program mandates that billions of gallons of grain-based fuel be mixed into gasoline every year, which many claim leads to higher food costs.
In December 2007, Congress increased the mandate for U. S. ethanol production, nearly doubling it. Nine billion gallons must be produced and mixed into the nation’s gasoline supply this year, according to the legislation, up from 4. 7 billion for 2007.
How successful the lobbying effort will be is yet to be seen. Congress isn’t likely to take up the issue in an election year, although at least one U. S. senator from Arkansas believes the tide may be turning in favor of the food companies.
Sen. Blanche Lincoln, D-Ark., said Congress must think through more deeply the unintended consequences of energy policy before making sweeping changes to current policy.
“I think it is right for us to set ambitious goals for renewable fuels, but we have to be cautious of the consequences and make sure that what we are doing is being thoughtful of the other industries that suffer those consequences,” Lincoln said. The U. S. Department of Agriculture says the government’s ethanol policy has not caused a significant amount of food-price inflation. “We don’t think conditions today warrant changes,” Agriculture Secretary Ed Schafer told a group of reporters and editors in Washington earlier this month, Bloomberg News reported. Corn prices rose about 80 percent in the last year, and with recent floods in the Corn Belt, the cost of a bushel of corn is now hovering above $ 7. That matters to meat producers like Springdale-based Tyson Foods Inc., because it uses corn and soybeans to feed millions of chickens every week. Tyson will absorb $ 600 million of extra grain expense this year, the company has said. It also matters to consumers, because the price of meat is rising on retail shelves as manufacturers cope with the commodity inflation. Even food banks have been affected, one Springdale minister said. To what degree ethanol production affects the price of corn — and food — is a matter of debate. But the issue will almost certainly fuel a political clash after the new president takes office, as the meat industry works this year in the halls of Congress to get rid of subsidized ethanol in the United States.
OPENING SHOTS Texas Gov. Rick Perry petitioned the Environmental Protection Agency in April for a one-year, 50 percent waiver from the federal renewable fuel standard mandate for grain-based ethanol. He said the EPA needs to cut the ethanol mandate in half “before permanent damage is done.”
The Food Before Fuel Coalition — which includes the American Meat Institute, National Chicken Council and National Cattlemen’s Beef Association — got behind Perry’s petition, and Tyson Chief Executive Officer Richard Bond wrote the EPA in support of the waiver.
The EPA has the authority to reduce the number of gallons mandated by the fuel standard program. The comment period closed Monday and the agency has until July 24 to make a decision.
In his letter, Bond said the government mandates “have driven in large part increased corn prices and the unprecedented volatility in agricultural markets.”
“We are obviously butting heads with people like the corn producers and the ethanol lobby,” said Archie Schaffer III, Tyson’s senior vice president for external relations. “Those are some very powerful Washington interests that have been at this game for a long time, and it is going to be difficult to get the Congress and the executive branch educated and turned around on some of these issues.”
Corn prices have tripled in the last two years, hitting an all-time high of $ 7. 915 a bushel June 16. High food demand in the world’s two most populous nations — India and China — plays a large part. The high cost of diesel fuel contributes to higher transportation costs for corn and food products in general.
But the U. S. domestic ethanol policy is the one factor that can be affected in Washington.
However, with the presidential election campaign under way, few analysts expect any movement on ethanol policy this year.
In the interim, the group released a deluge of information to the media, claiming the ethanol standards are contributing to more world hunger, higher food prices and lower margins for cattlemen. The Renewable Fuels Association, which represents the ethanol industry in Washington, disputes that. “Certainly this is your textbook Washington, D. C., inside-thebeltway smear campaign,” Matt Hartwig, a spokesman for the Renewable Fuels Association, said about the coalition’s efforts.
HUNGER ISSUES Rising food and fuel prices are driving more demand for social services, local food-pantry managers say. Business was brisk recently at Springdale Christian Church, which collects food and distributes it to the poor. Church pastor Daniel Dickard said the pantry served about 60 families a week last year, but that number has increased this year to 100 families a week.
“We’re having to make do with the same amount of food” as a year ago, making it necessary to stretch the food further, he said.
Claudia Goss, 46, from War Eagle, 15 miles southeast of Rogers in Benton County, said she had to swallow her pride to walk into the food bank. She is taking care of two people at home and can’t make ends meet.
“You like to take care of yourself as much as you can,” she said, noting that the prices of milk and cooking oil are on the rise. “It sure makes you more aware of how bad it gets out there,” she said, waiting for pantry workers to put together a basket of food for her.
Gus West, board chairman and president of The Hispanic Institute, a Washington nonprofit that signed on with the coalition, said rising corn prices are affecting nutrition in poor populations already.
“We have children in the hemisphere that are having their growth stunted because of the rise in food prices,” West said. The coalition has an uphill battle to fight, political analysts say. “All the pressure is in favor of keeping the standards where they are, and if you could even increase them, then increasing them,” said Andrew Dowdle, an assistant professor of political science at the University of Arkansas at Fayetteville. Dowdle contends that a minority of legislators representing Midwest-region corn states are driving the political agenda on behalf of the ethanol industry. Other lawmakers have less interest in the issue, but go along for political motives totally unrelated to ethanol policy. “I don’t think that [the coalition members ] have, at this point, the critical mass that’s going to end up influencing the vast majority of members of Congress,” Dowdle said. David Bullock, a professor at the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign, said the anti-ethanol lobbyists have “a big hurdle” to overcome. “That’s because the corn producers and the ethanol producers are just really strong politically. They’ve got a nice story — the family farm — and they have a lot of political acumen,” he said.
BIG CHANGE ? The tide could turn, however. There are life-or-death issues involved in this debate, Bullock and others claim. World food-price inflation disproportionately affects the poor in Third World nations, and as famines are linked to rising corn prices, the political will to slow ethanol production may become more realistic.
“There’s going to be a lot of talk about people going hungry in the Third World, and here we are using corn for fuel, and that’s not going to look good for the corn and ethanol producers,” Bullock said. “It gets to the point where there are serious ethical issues involved.”
Asked if legislators in Washington are changing their minds on ethanol mandates, Sen. Lincoln said yes.
She added that even delegates from the Midwest — who also represent cattlemen, meat processors and pork producers — have to come to terms with what effect the renewable fuels standards have on grain markets.
“I think that some of those out in the Midwest would like to see the continuation of what has been a very profitable program for them, but I think they also see the reality that it is not sustainable,” Lincoln said.
Lincoln, a member of the Senate Committee on Energy and Natural Resources, advocates a varied approach to energy policy, like cellulosic ethanol made from tall prairie grasses, or fuel made from chicken fat.
So does the junior senator from Arkansas, Mark Pryor, also a Democrat.
Michael Teague, a spokesman for Pryor, said that rolling back the mandates may not be the right decision and could cause unforeseen consequences. He agreed with Lincoln that other biofuels must be considered as part of the solution.
“This is a huge deal. There are no easy answers, but the senator’s door is open to have these discussions. We know there has to be some flexibility here,” Teague said.
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