An Ethanol Timeline: How We Got Here

Model Ts were "flex-fuel" and some could run on ethanol.

This second blogpost in the series, “Corn-Fed Cars: On the Road with Ethanol,” continues the conversation about ethanol and explores the forces that converged to get us to this critical—and contentious—moment in biofuels history.

Since 1826, when it was first used to power internal combustion engines (ethanol timeline), ethanol has been of interest to entrepreneurs and agriculturists as a possible alternate fuel. As early as 1862, it was heavily taxed to pay for the Civil War. In 1908, Henry Ford produced the flex-fuel Model T, although by then cheap oil took over the powering of the nation and ethanol languished.

Fast-forward to 1974, when Archer Daniels Midland (ADM), the main producer of high fructose corn syrup, found itself in a quandary. The wet milling process used to manufacture corn syrup from corn grain created, in excess, a by-product known as ethanol, and ADM launched a shrewd search to find or create a market for it. (See this paper on the “Ethanol Swindle.”) Capitalizing on the “Project Independence” initiative started by the Nixon administration to reach total independence from foreign energy sources, ADM began a political campaign promoting ethanol as an additive to gasoline—and the current ethanol industry was born. (Read this paper for more on the history.) Read More >

The Genesis of Corn-Fed Cars

Iowa Corn Indy 250

Also contributing to this story is Dennis Keeney, PhD, MS. | Over the next six months, this bimonthly blog series, “Corn-Fed Cars: On the Road with Ethanol,” will initiate a conversation about ethanol and the current environmental and economic impacts of its use.  This first post addresses the progression of ethanol use in the U.S., and the forces that have gotten us to where we are today.

This June at the “Iowa Corn Indy 250,” flags touting “Iowa Corn” and t-shirts promoting “Corn Power” were a common sight at the Newton, Iowa racetrack. The slogans are no surprise, given two facts: first, that the race is sponsored by the Iowa Corn Promotion Board, and second, fellow racing giant NASCAR’s  announcement last year that they will partner with American ethanol producers to fuel its fleet with a gasoline blend containing 15 percent corn ethanol.

At a time when the buzz about corn ethanol seems to have died down on the coasts, its advocates are speaking up, and production in the Midwest continues to ramp up to record levels in light of government subsidies and mandates that spurred the growth of the industry over the last decade. Today, 40 percent of the corn crop in the U.S. goes to ethanol production. Read More >

Corn Panic

By Dr. Dennis Keeney, Visiting Scholar, Johns Hopkins Center for a Livable Future

corn-for-ethanolThe USDA 2011 Prospective Plantings Report was one of the most anticipated planting reports in several years. It came on the heels of a shocking Grain Stocks Report issued last month, which showed that corn stocks have come down 15% since March 2010. Ending stocks are projected to be only 675 million bushels, about 5% of the projected marketing year consumption, while consumption of the current marketing year corn was higher than in 2009 and well above projected consumption. Lowered stocks were also caused by a smaller than expected corn crop due to cold and rainy weather in the Corn Belt in 2010. Corn prices almost immediately increased by another $1 per bushel on the heels of a doubling of price during the past year. This dramatic price jump portends another round of world-wide food price increases, similar to those in 2008-2009. Already, some political uprisings in the Middle East have been blamed to some extent on rapid food price increases. In 2008-2009, yields bounced back to normal and the ethanol demand was much lower.

Why has this happened? Will it be alleviated by a bumper crop on more acres in 2011? Or has the grain commodity price structure started a trend towards a “new normal” of steadily increasing prices and more shortages?

The March 31 crop report indicated that farmers “intend” to plant 5% more acreage in corn, 8% more in wheat and 15% more in cotton while cutting soybean planting by only 1%. This adds up to 4 million more acres of cropland than there were in 2010.  One wonders where that extra land is coming from. Most likely, it is land being retired from the Conservation Reserve Program (CRP), and includes more fragile meadow and grassland. That is not good news for the environment. Just recently, a number of congressional members called for the immediate release of some of the 31.2 million acres of CRP for cropland.

I would like to explore what corn is used for and why the sudden drop in ending stocks surprised so many people, before presenting some scenarios that may play out in the near future. Read More >

Again Ethanol and Food are in Conflict

Once again the conflict between the use of corn for ethanol production and the amount of corn available for consumption by swine, beef, dairy and poultry has come into conflict.

Corn prices have increased an astounding 85% in 6 months.

There simply is not enough corn to go around, and thus the price of corn increases. When corn prices rise, prices of other grains also rise. Wheat, rice, even barley rise.And surprise, surprise, the price of  processed food rises.  Why is this?

First, one has to look into the dark world of agricultural economics. Corn, in many ways similar to oil, is a world-wide commodity. Many countries produce corn (for example, China grows more corn than the United States, but has a lot more people to feed). But only a few countries have enough left over to sell on the world markets. Argentina along with the United States are the main exporting countries. And when the corn crop declines in other consuming countries such as China or Mexico, they buy more corn on the open market. And as these countries move “up the food chain” to consume more red meat, pork, dairy and  poultry, they need more corn. So they buy corn from those few countries that have some to spare. But with several countries bidding for corn and a limited supply, the price goes up. It is an “inelastic” situation.  If corn is not available, wheat will do nicely, so will sorghum, etc. So these grains become more valuable. And “wala” food prices rise. Most affected are foods that rely on corn, such as pork, beef, chickens and eggs. But bread soon follows. and this brings food riots. Even the recent uprising in Egypt is being blamed in part on rapidly increasing food prices (I feel this is a stretch,but do not claim to be well-informed in such matters). Even the price of tamales goes up in Mexico. Sure they use white corn, but white corn is also good pig feed so it is bidding against our yellow corn.

Ethanol plays a central role in this fray. Processing a bushel of corn gives about 2.8 gallons of ethanol (less if one converts the energy in ethanol to a gallon of gasoline). The government in its wisdom has mandated that we must use about 12 billion gallons of ethanol by next year. That translates to a lot of corn, about 25% of all the corn grown in the United States. In Iowa, by far the largest ethanol producing state in the nation, about half the corn goes to ethanol. So when supply goes down while demand goes up, the market “bids” for corn. They buy corn from other uses by paying a higher price, and the higher price encourages farmers to plant more corn next year. More grassland and highly erodible land go into cultivation. This increases erosion and water pollution, and turns the countryside even more into a row crop desert.

It seems pretty clear that changing climate is impacting the discussion. This past year, corn production dropped in the United States by about 9%, a huge decline. Bad weather in other parts of the world have cut down on grain production as well. In the meantime, demand for meats and  for foods made from corn continues to increase.

The struggle between the farm state politicians who push for ethanol from corn (and they must or they are summarily dismissed by the farm block supporters such as Farm Bureau and National Corn Growers) and the rest of the country who are being pressured by food wholesale and retail interests, as well as by swine and poultry growers). It is all part of the farm bill, no matter how altruistic the discussion may be.

I have said for years that ethanol policy was really corn policy. Its objective was to assure a demand for corn and a stable high price. Well it worked. Now we have the unintended consequences. At least for the next few months higher prices for many food staples will increase. And to hear some say it, corn based ethanol is to blame. I tend to agree, but as you can see, it is not simple. But then nothing in the convoluted world of farm policy is.

The Ethanol Policy Trap

keeney-header

Mention the biofuel ethanol from corn in anything but glowing terms in Iowa five years ago and one had probably best apply for witness protection. Created by political pressure from the corn and the high  fructose corn syrup industry with the lobbying from ADM and later other corn-related lobby groups, corn ethanol went from a few million gallons, as an afterthought from the wet milling industry, to about 12 billion gallons per year today (the numbers are approximate, plants are opening and closing depending on market conditions). This will require close to 4 billion bushels of corn (each bushel of corn on average supplies about 2.8 gallons of ethanol). In the process ethanol production uses about 36 billion gallons of water just for processing, and requires about 20 million acres of corn land. All this to displace about 8.5 billion gallons of gasoline (ethanol has about 67% of the energy per volume as does gasoline). Further it requires about 7 gallons of diesel fuel equivalent to produce 10 gallons of ethanol when one accounts energy to grow the corn, deliver it to the processing plant, and to process the corn to ethanol. Therefore the net energy gain is about 3-4 billion gallons of gasoline equivalent. We have about 245 million cars in this country. If each car used 20 gallons of gas per year less–by improved efficiency and driving less–we could save nearly 5 billion gallons of gas, more than the ethanol that is being produced by the industry when put in energy equivalents.

Corn is King in the Midwest. Iowa produces over 2.2 billion bushels and sends about one-third of its crop to ethanol plants. That is the base of the ethanol madness–create a market for more corn where no existed before. And it has worked so far, thanks to government support.

Much of the rest of the corn goes to feed livestock and for export. Only about 10% can truly be said to be made into food products, and that includes the unhealthy HFCS. Trailing corn, but still very important is the legume, soybeans. Biodiesel from soybean oil has been on the burner for several years but the economics have never worked out.

The corn ethanol lobby has been hoisted on its own petards. They calculated that if they mandated ethanol use, the market would follow. This worked for the first 7 billion gallons. Since we burn about 130 billion gallons of gasoline a year, the blend of up to 10% ethanol would not be an issue. But in 2007 the mandate was progressively increased and soon will be 15 billion gallons. Simple math says that there will have to be more than 10% ethanol in all of our gasoline to meet the mandate. So the industry asked EPA to raise the “blend wall” to 15% by the end of 2009. EPA is still studying the request. They are concerned with engine component damage and air pollution issues. Time will tell. Another industry answer was a blend of up to 85% ethanol. That has not worked out, because the extra pumps cost more than they return in profits, and few buy E85 both because it performs less satisfactorily and because not many cars and trucks are capable of using E85 without engine component damage. Read More >

IATP Calls for Halt to Antibiotic Use in Ethanol Industry

In the wake of recent Congressional hearings calling for a halt to the use of antibiotics in farm animal production, Minneapolis-based Institute for Agriculture and Trade Policy has (IATP) just released a report saying the use of antibiotics in ethanol production is unnecessary.

“The ethanol industry should voluntarily stop the unnecessary use of antibiotics in the production process, particularly because viable alternatives are readily available,” says the IATP report, “Fueling Resistance? Antibiotics in Ethanol Production.”

“The epidemic of antibiotic resistance threatens every one of us,” says IATP’s David Wallinga, M.D. “The best way to keep our existing antibiotics effective is to stop unnecessary antibiotics wherever they are used-in hospitals, in animals and in ethanol production.”

According to IATP, ethanol producers add antibiotics to the ethanol fermentation process to control bacterial outbreaks. And, since there are no reporting requirements for antibiotic use in ethanol production, there are no reliable numbers are available on how widespread the practice is. IATP notes that in 2008, the FDA found residues from four types of antibiotics in dried distillers grains-the nutrient-rich residue sold as livestock feed that is a co-product of ethanol production.

It seems that nearly half of the nation’s 170 ethanol production facilities avoid antibiotic use through readily available alternatives. and many others are exploring ways to stop antibiotic use. “The bad news is that many ethanol facilities are currently using antibiotics. The good news is that they don’t have to,” says IATP’s Jim Kleinschmit.

Obama Sets Up Biofuels Working Group

cornThe blogosphere is abuzz today over the just-announced Biofuels Interagency Working Group, which throws a lifeline to the troubled ethanol industry. The group, headed by the secretaries of the Department of Energy, Environmental Protection Agency and the Department of Agriculture, has been given the charge by President Obama to make biofuels friendlier to the environment while encouraging the development of more of those “flex-fuel” cars that are so popular in the Midwest.

The formation of the working group—the administration’s first major statement on the touchy issue of enthanol use and production—will spell relief for the depressed industry, which has shuttered production facilities and delayed or canceled building new plants due to lower gas prices, higher costs for corn, and the credit crunch. Through the working group, the government will assist in refinancing some of the troubled operations and guaranteeing loans for construction of new biofuel projects. Recent earnings announcements from companies heavily-invested in the government-subsidized enthanol program have been dismal. ADM, for one, said today their third quarter profit dropped 98 percent, with a $167 million decline in the biofuel division alone. Read More >

Farmers Can Help Re-Localize Our Energy

Pelletized grasses can provide a low-tech, renewable heating fuel.

Pelletized grasses can provide a low-tech, renewable heating fuel.

Rather than helping to produce liquid fuel (ethanol) for vehicles, a better future for some of the nation’s farms may be in growing grass for use as a heating fuel, according to Jock Gill, president of Pellet Futures, a bioenergy consultancy.

Gill spoke Saturday in State College, Pa., at the 18th annual conference of the Pennsylvania Association for Sustainable Agriculture, in a talk entitled “Getting the Miles Out: Relocalizing Energy,” in which he envisioned a “community supported energy” model similar to the increasingly popular community supported agriculture. He advocated a shift away from an energy system that involves centralized control of production, then distribution through a vastly inefficient electrical grid, to a system that is more locally controlled – a more democratic energy system. Read More >

Ag Nominee Vilsack Receives Strong Support at Confirmation Hearing

 

As far as Senate confirmation hearings go, yesterday’s testimony by President-elect Barack Obama’s pick to become the next Secretary of Agriculture proved to be a big yawn. Questions asked of former two-term Iowa Governor Thomas Vilsack seemed soft, often patronizing, during the 2-1/2 hour question and answer session.

Watch a video of the entire testimony:

 

Sen. Tom Harkin (D-IA), chairman of the Senate Agriculture, Nutrition and Forestry Committee, pointed to health care reform as an opportunity for the USDA. “I think we have a big role to play in that in…(with) the reauthorization of Child Nutrition Program. That’s the only thing we have to do this year,” he said. Gov. Vilsack pledged to implement the 2008 Farm Bill–and the reauthorization of the Child Nutrition Program. “We can work with our schools to insure that fresh fruits and vegetables are available,” and work with local producers and ensure distributions systems are in place, he told the senators. Read More >

Ag Nominee Vilsack: Concerns on Ethanol, Biotech, Climate, CAFOs, Corporate Concentration, Hunger and Nutrition

In response to the blog post below, it is worth expanding, to clarify the reasons many in the sustainable agriculture community – and others who are concerned about sustainability, justice and public health – are feeling let down by the choice of the new secretary of agriculture, even as we try to remain hopeful about the overall direction of change.  
 
First, Tom Vilsack is a major proponent of ethanol production. Industrially produced corn ethanol has been disvalued for climate change mitigation because it contributes more emissions than it reduces. Further, industrial corn ethanol production leads to substantial environmental impacts from fertilizer and pesticide use. But the impacts go beyond environmental, to corn ethanol’s destabilizing effect on food prices around the world. The former U.N. special rapporteur on the human right to food has termed corn ethanol “a crime against humanity.” As of early December, the U.N. reported that nearly 1 billion people around the world are now undernourished; these numbers have risen substantially  in the wake of the food price spikes. Estimates on ethanol’s role in the rise in food prices range from a few percent up to 3/4. Vilsack does support moving over the mid-to-long term towards other forms of ethanol.  But even with alternate ethanol sources, significant problems in terms of land use for energy vs. food, corporate concentration, and unsustainable production methods are likely to remain. Read More >