Domestic Fuel

As the Global Forum for Food and Agriculture draws to a close in Berlin, the Global Renewable Fuels Alliance (GRFA) has challenged new United Nation’s Food and Agricultural Organization (FAO) Director General Jose Graziano Da Silva on his critique of biofuels and their alleged impact on commodity prices.

“Mr. Da Silva has failed to recognize that the rising price of energy is the primary driver in the rising cost of all commodities including corn and sugar,” said GRFA spokesperson, Bliss Baker.

Many international organizations have back tracked on their criticism of biofuels based on research which has found biofuels to have played a very minor role in the escalation of food prices globally. In fact, David Hallam, the FAO’s own Deputy Director has said that “unexpected oil price spikes could further exacerbate an already precarious situation in food markets.”

“Mr. Da Silva would do well to listen to the International Energy Agency’s dire warnings about our energy security future when commenting on biofuels,” said Baker. “The IEA concluded that biofuels could provide 27 percent of total transport fuel by 2050 and avoid around 2.1 gigatonnes of CO2 emissions per year when produced sustainably without jeopardizing food security,” said Baker.

The GRFA has repeatedly called for an increase in the use of biofuels to help reduce the world’s crippling reliance on crude oil.

“I would urge the new FAO Director General to focus on the real cause of high food prices – the rising cost of energy,” added Baker.

A Texas corn grower says the “feed versus fuel” debate is based in fallacy.

Texas Corn Producers Board member Wesley Spurlock of Stratford has been speaking to groups across the Midwest explaining how U.S. corn farmers continue to grow a crop abundant enough to meet all growing demands and he has gained attention from industry publications looking to find the truth behind the headlines.

“To put it simply, growth in demand from the ethanol industry has mirrored an increase in productivity that yields larger corn crops,” Spurlock said. “We are still supplying the livestock industry with the corn that they need for feed, but we now have a market that utilizes an increasingly abundant resource to help solve our energy problems also.”

Listen to an interview with Sprulock in the National Corn Growers Association’s podcast series “Off the Cob” discussing how corn farmers are growing a larger crop on the land already in production while decreasing inputs used. During this interview, he also discusses the innovations facilitating increased yield trends, how the Texas drought plays a major role in recent cattle industry shifts, and the amazing story of modern American agriculture.

According to the American Farm Bureau Federation (AFBF), the retail cost of menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings increased about 13 percent this year. That’s still less than $50 to feed ten people – not even $5 per person.

The turkey itself is what gobbled up most of the price increase this year. According to AFBF, a 16-pound turkey will cost about $21.57 this year at $1.35 per pound, an increase of about 25 cents per pound over last year. That triggered some misinformed columnists to start crying fowl and place the blame for the higher price on ethanol, as pointed out in a blog post from Growth Energy.

“Our biofuels policies are a big cause of the rising cost of food in recent years, and it just feels wrong to use food for fuel with so many families struggling to feed their families,” wrote Marie Brill of ActionAid in the Huffington Post, adding that “federal ethanol subsidies … are driving up the price of everything from eggs to milk to — yes, turkeys — and undoubtedly, some families will just have to go without.”

However, AFBF economist John Anderson says it’s more a case of basic economics – supply and demand. “Turkey prices are higher this year primarily due to strong consumer demand both here in the U.S. and globally,” said Anderson.

A more well-rounded and less emotional look at the cost of turkey comes from New York Times’ Wealth Matters columnist Paul Sullivan. “It turns out that turkey pricing is not much tied to commodities prices. Instead, other factors, like tight margins for farmers and perceptions of value, play a much bigger role,” he explains. “For most of us, the price we pay for our turkey bears little relation to what it costs to raise it.”

Read “Let’s Talk Turkey” from Growth Energy.

The Global Renewable Fuels Alliance (GRFA) is calling comments made this week by a Qatari government advisor about biofuels contributing to world hunger “self-serving.”

At a global grains summit in Turkey on Monday, Quatari food security program advisor Mahendra Shah was quoted as saying, “Biofuels will trigger an increase in agricultural prices. Biofuels will result in another 120 million people hungry, just because we’re growing biofuels.” He cited a study by the Organization of the Petroleum Exporting Countries Fund for International Development (OFID) which claims the use of crops for biofuels is forecast to raise food prices by 30 percent to 50 percent by 2050.

Noting that the report cited was funded by OPEC’s International Development arm, GRFA spokesperson, Bliss Baker said, “This so-called report from 2009 cannot withstand any level of academic scrutiny and is a self serving attempt to distract people from the real impact that energy prices are having on global commodities.”

“Qatar, a key OPEC member and promoter of this report, derives 85% of its export earnings and over 70% of its government revenues from crude oil. Qatar’s agenda is to promote crude oil and discredit alternatives like biofuels,” Baker added.

According to GRFA, there is evidence that demonstrates that the OFID report is wrong, including a 2011 study by the International Energy Agency that says “by 2050, biofuels could provide 27% of total transport fuel” and will “not compromise food security”. The GRFA recently published data showing a clear and direct link between crude oil prices and the UN FAO’s Food Price Index.

A new study has looked at the “real” impacts of U.S. biofuels production both domestically and internationally and has concluded it is “negligible or nonexistent.” The research was coauthored by Dr. Seungdo Kim and Dr. Bruce E. Dale and was published in the July issue of Biomass and Bioenergy Journal under the title, “Indirect land use change for biofuels: Testing predictions and improving analytical methodologies.”

“It is the first evidence-based evaluation of ILUC utilizing actual historic data, employing a ‘bottom-up’, data-driven, statistical approach based on individual world regions’ land use patterns and commodity grain imports,” stated Dr. Roger Conway, senior partner at Rosslyn Advisors LLC and former director of the United States Department of Agriculture’s Office of Energy Policy and New Uses.

The authors say that very few previous studies have attempted to find empirical evidence for or against indirect land use change from historical data, rather most studies rely on global economic simulations.

Dale said, “Unlike most other ILUC work this study relied on very few assumptions and did not attempt to quantify nor to predict ILUC effects. We searched for direct historical evidence for ILUC in relevant world areas rather than attempting to project or predict what course ILUC might take. Projecting forward can force scientists to make untestable assumptions.”

This study was unique in that is used data from 1990, when the U.S. biofuels industry was very small, as its baseline. It then measured crop changes against that as U.S. ethanol production has significantly grown during the past decade.
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A new report from Informa Economics released today concludes that ethanol production is not causing a “strict food-versus-fuel tradeoff” that automatically drives consumer food prices higher.

The report, which was prepared for the Renewable Fuels Foundation, is an historical analysis of corn, commodity and consumer prices from 1985-2010. One of the key findings of the study was that no single factor has been responsible for higher consumer food prices over time, “but rather, there is a complex and interrelated set of factors that contribute to food prices.”

The report also found that other supply and demand factor besides ethanol, such as increased exports, have also contributed to the rise in the commodity price for corn. “Furthermore, corn prices have a relatively weak correlation with food prices, as the farm share is a relatively small portion of the overall retail food dollar and for many products corn is only a portion of the farm value,” said report author Bruce Scherr, CEO and Chairman of Informa Economics.

“Yet again, sound analysis has demonstrated that the farcical food-versus-fuel debate is just that – a joke,” said Renewable Fuels Association President and CEO Bob Dinneen. “Unfortunately, the effort to scapegoat ethanol in order to continue our addiction to imported oil is not funny. The fact remains that no statistical evidence exists demonstrating a significant link between ethanol, corn prices, and rising food costs.”

There are several proposed amendments to current ethanol tax policy including the VEETC and tariff. Many believe that these incentives will disappear at the end of the year, but what would happen if they were extended? Today, the blender’s credit (VEETC) is 45 cents and the ethanol tariff is 54 cents. According to research conducted by University of Missouri economists, this action would boost corn-based ethanol production as well as corn prices.

Seth Meyer, economist with the MU Food and Agricultural Food and and Policy Research Institute (FAPRI) ran a “what-if” scenario on FAPRI computers. With incentives in place, the results showed fuel production from corn would increase by 1.2 gallons over current production levels and corn prices would increase by 18 cents per bushel. In addition, the model predicts that corn acreage would increase by 1.7 million acres.

Earlier this year, the team ran the scenario without tax credits and tariffs. However, this time the scenario was run on the assumption that they would continue but did not factor in any changes to current biofuel mandates.

“This analysis looks at an alternative scenario that keeps ethanol tax credit and tariff at current levels,” said Pat Westhoff, director of MU FAPRI. “There is debate about federal support of the ethanol industry. At a Paris meeting last week, G-20-nation trading partners raised concerns about U.S. support of biofuels. The revised baseline gives FAPRI a tool to study proposed policy changes.”

Westhoff notes that U.S. ethanol policy is complex with a broad set of assumptions. It is assumed that the blender of record who receives the tax credit would keep part of the benefit and then share part of the benefit with station owners. From there, it is assumed station owners would pass along the savings to consumers at the pump. In addition, the tax credit is also designed to allow blenders the ability to pay more for ethanol and ethanol producers the ability to pay farmers more for corn. However, this is not always the case.

Westhoff concluded, “Our work suggests that how benefits of the blender’s tax credit are shared among fuel consumers, ethanol plants and corn farmers is very sensitive to market conditions.”

A new report, “Growing a Better Future,” has the ethanol industry up in arms over its accusation that U.S. biofuel policy is leading to world hunger. The report kicked off a new worldwide GROW campaign spearheaded by the organization. The report covers the symptoms of today’s broken food system: growing hunger, flat-lining yields, a scramble for fertile land and water, and rising food prices while the GROW campaign attempts to overcome these issues.

The report predicts that the price of food, already at a record high, will more than double in the next 20 years. In addition, by 2050, demand for food will rise 70 percent, yet the report says the world’s capacity to increase food production is declining. A contributor to these issues: global climate change and pro biofuel policies throughout the world.

“Our world is capable of feeding all of humanity yet one in seven of us are hungry today,” said Jeremy Hobbs, Executive Director of Oxfam. “In this new age of crisis, as climate change impacts become increasingly severe and fertile land and fresh water supplies become increasingly scarce, feeding the world will get harder still. Millions more men, women and children will go hungry unless we transform our broken food system.”

Both Growth Energy and the Renewable Fuels Association acknowledge that Oxfam is partially correct in their identifying the role that high oil prices and international trade have on the price of corn. However, they diverge with the report on biofuels being a cause of starving “millions of people” as the report purports.

“Oxfam is wrong to propose ending the Renewable Fuel Standard or the biofuels tax credit, as these are the most effective policies we have to displace oil – a primary driver of rising grocery prices,” said Jim Nussle, Growth Energy President. “It is unfair and erroneous to single out ethanol for high food prices, especially because the U.S. ethanol industry uses just three percent of the global grain supply on a net basis.”

RFA President Bob Dinneen highlighted the significant improvements in agriculture over the past few decades and called for more widespread adoption of improved agricultural practices worldwide. “The same opportunities at varying scales are available to farm communities in developing nations. Together with improved farming technologies, local biofuel production can provide developing rural economies with the kind of economic prosperity needed to become more food secure,” concluded Dinneen.

FAO has released a new report that contains methodology designed to aid policymakers assess the pros and cons of investing in the bioenergy industry. The “Bioenergy and Food Security (BEFS) Analytical Framework” was written to help governments evaluate the potential of bioenergy as well as assess its possible food security impacts. The framework was developed over a three-year time frame and cites development and field tests that took place in Peru, Tanzania and Thailand.

The report is comprised of a series of step-by-step evaluations that seek to answer critical questions regarding the feasibility of bioenergy development and the impacts on food availability and household food security. In addition, social and environmental dimensions are also considered. The paper also serves as a platform for bringing key ministries and institutions together so they can work on the same page.

“Our goal is to help policy-makers take informed decisions regarding whether bioenergy development is a viable option and, if so, identify policies that will maximize benefits and minimize risks,” explains Heiner Thofern, who heads FAO’s Bioenergy and Food Security (BEFS) project.

The drive to biofuels have been driven by both worries over greenhouse gas emissions from fossil fuels as well as high oil prices and energy security concerns. FAO believes that one important benefit of investments into the bioenergy sector is that it could spark much-needed investment in agricultural and transport infrastructure in rural areas. This would create jobs and boost household income. These benefits could lesson both poverty and food security concerns. FAO has also conducted separate studies that show small-scale bioenergy projects not designed for export markets can improve food security and help boost rural economies.

“FAO has been saying for years that under-investment in agriculture is a problem that seriously handicaps food production in the developing world, and that this, coupled with rural poverty, is a key driver of world hunger,” says Thofern. “Done properly and when appropriate, bioenergy development offers a chance to drive investment and jobs into areas that are literally starving for them.”

Yet while there are major potential benefits to bioenergy production, FAO warns there are also potential negatives. They write that large-scale biofuel production could come at the expense of food production, leading to less food available, and higher food prices. In addition, deforestation is also a concern. Therefore, potential risks and benefits need to be weighed.

I just returned from Toronto, Canada after attending the 2011 BIO World Congress (great stuff and check back as I post a series of audio interviews from the conference) and the country is feeling the impacts of rising gas prices. Consumers in Central Canada have seen gas prices rise nearly 30 cents almost overnight despite the drop in oil prices and many consumers are asking the question of who to blame. The front page article in The Globe and Mail on Wednesday, “The gas price puzzle,” stated that gas prices are higher now than in 2008 when a barrel of oil hit a record high of over $150 a barrel.

According to the article a “confluence of events” has caused the prices to skyrocket. “They include an unusual price discrepancy between European and North American oil and below average gasoline supplies in the U.S., which drives up whole-sale prices that also affect Canada.” Other factors include geography and bad weather south of the border.

Don’t let out sigh of relief that biofuels escaped blame. They didn’t and today a coalition of Canadian on-road diesel fuel associations are raising concerns that the biodiesel mandate set to go into effect in Canada on July 1st will actually cause gas prices to go even higher.

According to the coalition, which includes the Canadian Trucking Alliance (CTA), Motor Coach Canada (MCC) and the Owner-Operator’s Business Association of Canada (OBAC), the Canadian government’s own regulatory impact analysis statement predicts the biodiesel mandate will cost taxpayers $2.5 billion over the next 25 years and increase pump prices for diesel fuel. The report also believes fuel economy will decrease and any greenhouse gas emission reductions will be negligible.

To support their point, the coalition pointed the finger at Massachusetts and New Mexico’s biofuel mandates that allow for the suspension of the regulation should the price of diesel fuel be more than conventional diesel fuel. In addition, the coalition says that U.S. state biodiesel mandates have raised diesel prices anywhere from 1-8 cents per gallon, even with subsidies.

The coalition also cited other fears.
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Sun and algae go together like peanut butter and jelly. Just ask Karl Seitz, Co-Founder of Heliae. I sat down with Seitz during the Advanced Biofuels Leadership Conference in DC to learn a little more about his company and their technology. The first unique attribute of the company is their name. Heli is Greek for the sun and the ae was added for algae so their name is the combination of the sun and algae.

Heliae was formed about four years ago when the team met two professors at Arizona State University (ASU) who told them about a new process by which they could take algae and turn it into jet fuel. The more they heard and understood about the technology, the more hooked they became.

“We looked in to it more and what was of particular interest to us was that their particular strains of algae grew very rapidly, doubled its weight every day, it was high in oil content, greater than 30 percent, and it had the right oil components,” said Seitz. That means it has a component of carbon that goes from C8 to C16 and that happens to be roughly the same carbon string that kerosene has. Kerosene is the main component of aviation fuel.”

Another pro of algae, said Seitz, is that not only can you produce fuel, but also food.

Listen to my full interview with Karl Seitz: Heliae - Measuring Algae by the Barrel

I asked Seitz about their technology and how they were going to go from pilot to commercial scale. “We’re going to start off with our proprietary strains of algae and improve upon them. We do not use a GMO strain. We use a strain that has been chemically altered and provides us with higher oil content and a faster growth rate,” said Seitz. “We also combine that with our closed photobioreactor and then we use our proprietary and patented extraction formulas and techniques to get the fuel out as well as the protein and carbohydrates.”

Seitz said the other issue they are focusing on is developing algae strains that are suited for different parts of the country or different regions around the world.

There are still questions about whether or not algal fuels and products can be competitive with petroleum based fuels and products. Seitz said their initial goal was to produce one barrel per day per acre and at that rate they think they can be competitive. And while many other companies are measuring success by the liter or the gallon, Heliae is measuring success by the barrel. The reason is that the world needs billions of barrels of renewable fuels to replace just aviation fuels. So in the future, Heliae hopes to play a major role in helping the world achieve that goal.

Click here to view the Advanced Biofuels Leadership Conference flickr photo album.

The Grain Farmers of Ontario have proclaimed that the food versus fuel debate should be over with the release of a new report that says farmers can serve both markets.

The study on “Effects of Biofuels and Bioproducts on the Environment, Crop and Food Prices and World Hunger” they say “should put an end to the ongoing debate of whether the grain we grow should be used for food or fuel. We can and should do both.”

As farm yields climb and investments are made in farm production in the developing world, feeding and fueling the world can even be done cost effectively. “My corn yields have increased by 35 percent since I started farming in 1975,” says Don Kenny who farms just outside of Ottawa and is the chair of Grain Farmers of Ontario. “I am confident that my land will continue to be productive and that new products and technologies will ensure my family supplies our local livestock market and the ethanol plant down the road for many years to come.”

The study found that global grain production has increased by 1.5% per year over the past 20 years, more than the 1.1% per year food demands are growing, according to the Food and Agriculture Organization of the United Nations. “Quite frankly, it is a relief for us to learn that production of biofuels, like ethanol, here in Ontario makes such a positive contribution to our environment without any notable impact on overall food prices and the world’s ability to supply food,” says Barry Senft, CEO for Grain Farmers of Ontario.

Read the study here.

Our latest ZimmPoll asked the question, “What causes higher food prices?” Most people responding seem to believe it’s a combination of factors – 47%. That’s followed by higher gas/energy costs at 23%, speculators at 18%, ethanol at 9% and weather at 3%. I wonder how the response would compare to an audience for a general news website like Fox or CNN. It sure doesn’t look like biofuels like ethanol are considered to be at fault. However, if you consider it to be a combination of factors, what would those be? Feel free to leave a comment.

Our new ZimmPoll is now live and asks the question, “How do farmers compare in social media use?” Let us know what you think and thanks for your your participation.

And if you have any questions you want to suggest for future ZimmPolls please let us know.

ZimmPoll is sponsored by Rhea+Kaiser, a full-service advertising/public relations agency.

The Chairman of Nestle, who just so happens to sit on the board of ExxonMobil, Peter Brabeck-Latmathe, lambasted global leaders for their support of “immoral” biofuel policies that are starving millions around the world earlier this week. In particular, he attacked the Obama administration for promoting corn-based ethanol and reserved no kind words for U.S. Agriculture Secretary Tom Vilsack who he claimed is making “absolutely flabbergasting” claims for America’s ability to produce food, feed and fiber.

This beat-down occurred during his speech at the Council on Foreign Relations (CFR) in New York and was published by The Independent. During his presentation he said, “Today, 35 per cent of US corn goes into biofuel. From an environmental point of view this is a nonsense, but more so when we are running out of food in the rest of the world.”

Brabeck-Latmathe continued, “It is absolutely immoral to push hundreds of millions of people into hunger and into extreme poverty because of such a policy, so I think – I insist – no food for fuel.”

The fuel versus food debate has been raging for several years. For each report that debunks the theory, another is published that places primary blame on rising food costs at the feet of America’s corn and ethanol industries. Yet, scores of economists have publicly acknowledged while there are dozens of factors that affect food prices, the current spike is being driven by speculators, a global increase in demand for protein and the unrest in the Middle East to name a few reasons.

National Corn Growers President Bart Schott responded to Brabeck-Letmathe’s comments. “It is scandalous, ludicrous and highly irresponsible for the chairman of a global conglomerate that tripled its profits last year to talk about higher corn prices forcing millions into starvation. Perhaps if Nestle is so concerned about food prices, its board will consider putting more of their $35.7 billion in 2010 profits back into poor communities. Just their profits alone represent more than half the entire farm value of the 2010 U.S. corn crop.”
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The man in charge at the USDA says American farmers are producing enough to provide the food AND fuel, in particular ethanol and biodiesel, this country needs.

During the recent Commodity Classic, Secretary of Agriculture Tom Vilsack took on the food vs. fuel debate head-on.

“It is irritating to me that we have to read about this all the time, because what it is basically is saying is that the folks advancing this argument either do not understand or do not accept the notion that our farmers are as productive and smart and innovative and creative enough to meet the needs of food and fuel and feed and export.”

And Vilsack took the blame for food price increases off the American farmers and biofuels industry and put it on a more likely culprit.

“I think OPEC has more to do with food price increases than farmers,” pointing out that even if you doubled the price of commodities, farmers, with their paltry 20 cents of every food dollar share, wouldn’t see much of an increase in their pocketbooks.

Vilsack said that those who are trying to stop the opportunity for the nation to be more energy secure, while creating good-paying jobs in the biofuels industry, don’t understand what is at stake.

“First and foremost, it is about national security. We import 60 percent of our oil. Sixty percent of the resources we spend on energy are traveling somewhere overseas probably to countries we don’t agree with or don’t like us. It makes far more sense to me to continue to provide opportunities for investment here in the United States.”

Listen to more of Vilsack’s comments on biofuels at Commodity Classic here: Vilsack on Biofuels at Commodity Classic