Domestic Fuel

Some farmers might be eligible for federal grants to cover the cost of putting in a wind energy turbine.

This ZDNet blog entry says farmers and ranchers in rural areas with fewer than 15 employees have until July 31, 2009 to apply for the USDA Rural Energy for America Program (REAP) grants:

The grants can be used to cover 25 percent of the total installed cost of a small wind turbine system, or another renewable energy system for that matter. They can be used in conjunction with the Federal Investment Tax Credit that applies to renewable energy technology investments. Caution, in the information I’m reading about this program, it could take up to two weeks to pull together an application, so you probably don’t want to wait until July 30 to start filling this out.

You can find more information at this USDA Web site.

Many are surprised by theUSDA’s planted acreage report out this morning that estimates the second largest corn crop since 1946 at 87.0 million acres, up 1 percent from last year.

USDA grains analyst Jerry Norton says the number was much higher than the trade was expecting. “It’s a big number,” Norton says, especially considering the planting delays in Illinois and Indiana due to wet weather. But, that caused higher prices through May and into early June, “So, even though it was getting late to plant corn it was a strong incentive to plant for producers who could still get it into the ground.”

The condition of the crop is also doing better than expected with 72% nationwide rated good to excellent, even though progress is running behind normal in some areas.

In another report from USDA, corn stocks as of June 1, 2009 totaled 4.27 billion bushels, up 6 percent from June 1, 2008. All this adds up to plenty of corn available this year for food, feed and fuel.

A Minnesota biodiesel facility is getting a $25 million USDA Rural Development loan that will help the refinery expand the number of feedstocks it is able to turn into the green fuel… including the by-product of another green fuel:

USDA Rural Development is providing SoyMor Biodiesel a $25 million guaranteed loan to purchase equipment that will enable SoyMor to convert multiple types of feed stocks, including an unrefined corn oil waste product from nearby ethanol facilities, into biodiesel. In its current configuration, the plant only has the ability to process soybean oil.

The loan is the second USDA Rural Development has made under the Section 9003 Biorefinery Assistance Program of the 2008 Farm Bill.

USDA officials say the loan will restore nearly 30 jobs to the local Albert Lea community after the biodiesel plant had to suspend operations just more than a year ago. In addition, it will add value to the area’s ethanol industry.

Agriculture Secretary Tom Vilsack says USDA has met President Obama’s 30-day directive to expedite and increase the production of biofuels.

“Further developing the biofuels industry helps create jobs and stimulates rural economies, an important part of getting our economy back on track,” Vilsack announced. “President Obama and I are committed to advancing clean and renewable energy as it creates jobs domestically and boosts tax revenues at all levels of government.”

Among the objectives USDA was asked to accomplish on May 5 were biofuels provisions of the energy title of the 2008 Farm Bill, including providing loan guarantees and grants for biorefineries, expediting funding to encourage biorefineries to replace the use of fossil fuels in plant operations and encouraging production of next-generation biofuels.

USDA is also launching the Biomass Crop Assistance Program for the collection, harvest, storage, and transportation of biomass for conversion facilities.

The U.S. Department of Agriculture is expecting more corn to be made into ethanol and exported overseas this year, but less to be fed to livestock.

According to the May World Agricultural Supply and Demand Estimates released on Tuesday morning, total U.S. corn use for 2009/10 is projected to be three percent higher than the current year with higher expected food, seed, and industrial (FSI) use and exports more than offsetting a decline in projected feed and residual use.

Total usage in the FSI category use is projected seven percent higher with a 350-million-bushel rise in ethanol corn use accounting for most of the increase. The 4.1 billion bushel estimate for ethanol reflects the increase in the Renewable Fuels Standard, as well as improved blending incentives as higher gasoline prices increase demand for ethanol.

At the same time, exports are projected to increase by nine percent “as world corn trade and feeding are expected to recover
modestly in 2009/10, partly reflecting a reduction in global supplies of low-cost feed quality wheat.”

USDA is also forecasting that the amount of corn used to feed livestock will be down two percent this year due to reduced animal numbers and the increased availability of the ethanol by-product distiller’s grains used for animal feed.

U.S. Agriculture Secretary Tom Vilsack counted progress toward energy independence among the Obama administration’s first 100 days accomplishments.

During a meeting in Washington DC with agricultural journalists this week, Vilsack said implementing the 2008 Farm Bill was his number one priority when he took the office of secretary. “The president gave me an instruction when he hired me to continue to promote renewable energy and biofuels, and for that reason we’ve been very focused on making sure that the energy title of the Farm Bill was accelerated in terms of rule making and in terms of making resources available to farmers and rural communities across the country,” said Vilsack.

Together with the Department of Energy, Vilsack said USDA has made $25 million available for research and development of technologies and processes to produce biofuels, bioenergy, and high-value biobased products.

The amount of industrial fats and oils in the U.S. has grown by nearly one-fourth over the past couple of years, fueled mostly by the growth in popularity of biodiesel.

This story in ICIS Chemical Business says the US Department of Agriculture’s (USDA) Economic Research Service (ERS) reports fats and oils used for industrial applications in the U.S. rose last year to an estimated 11.9 billion lbs, up by 9% from 2007, and by 24% from 2006:

Methyl esters, or biodiesel, was the biggest factor in the increase in fats and oils use, while applications in lubricants and similar oils also had significant spikes, the USDA reported in its 2009 Oil Crops Yearbook.

“The production of US biodiesel, which now accounts for over 75% of soybean oil’s industrial use, experienced an annual average growth rate of an astonishing 90% for most of this decade,” says Kenneth Doll, research chemist, Food and Industrial Oil Research Unit at the USDA’s Agriculture Research Service (ARS).

The article goes on to say the American numbers match the worldwide trend in industrial oils use.

The April World Supply and Demand report out today from USDA lowers ending stocks for corn, but keeps corn use for ethanol the same.

Corn ending stocks were cut by 40 million bushels “as higher expected feed and residual use more than offsets a reduction in food, seed and industrial use.” Food, seed, and industrial use was lowered 10 million bushels but ethanol remained unchanged at 3.7 million bushels.

However, market analyst Mike Krueger from The Money Farm says that may change next time around. “Ethanol production has been slightly stronger than people expected,” Krueger said during a conference call for the Minneapolis Grain Exchange today. “I think it will depend on how quickly these VeraSun plants get back on line and running. We still have four months or so left in the marketing year for that to happen.”

The lower ending stocks for corn means higher projected prices for the year. USDA is now forecasting the 2008/09 season-average farm price for corn will be $4.00 to $4.40 per bushel, up 10 cents on both ends of the range. This compares with the 2007/08 record of $4.20 per bushel.

The newest supply demand report out from the US Department of Agriculture today increases estimates of corn for ethanol usage.

According to the report, “U.S. corn ending stocks for 2008/09 are projected 50 million bushels lower this month as higher ethanol use more than offsets a reduction in exports. Corn use for ethanol is projected 100 million bushels higher on indications of improving blender incentives and higher ethanol use. Blender margins have become increasingly favorable since late February as gasoline prices have risen relative to those for ethanol. A continuing recovery in weekly production of gasoline blends with ethanol is also supportive of ethanol demand as are the latest data on ethanol production, imports, and stocks which indicate record use in December.”

Agriculture Secretary Tom Vilsack would love to see the ethanol blend rate increased to 15 percent, but right now he would be happy with 12-13 percent.

“Our view is that we can get to 12 to 13 percent by just simply understanding that it’s significantly not much different than 10 percent, it’s an insignificant difference, and under the rules and regulations EPA could do that,” Vilsack said Monday. “If you get to 15 percent or higher, there may be more review required, and we appreciate that. But the help is needed now.”

Vilsack made his comments during a press conference Monday to introduce rural stimulus funding. Of the six questions he was asked by reporters, half of them pertained to increasing the allowable blend rate for ethanol in gasoline, and he repeated his emphasis on the 12-13 percent level three times.

“Right now my focus is on 12 to 13 percent because I think it’s doable more quickly, and it sends, I think, the right set of signals to the industry that we are with them,” the secretary said.

Vilsack also noted that USDA will continue to work with ethanol production facilities in financial difficulty to reconfigure their loans under a rural loan guarantee program. “That could be of some benefit, especially if the bankers are willing to work with us in restructuring the terms so that they are a bit more favorable either in interest rates or payments or principal,” said Vilsack. He stressed that the ethanol industry is still an “infant industry and so it’s going to have some growing pains. It’s going to have some ups and downs. And what we need to do is to provide some degree of stability.”

Listen to all of Vilsack’s ethanol related comments here: vilsack-ethanol.mp3

Podcast: Play in new window | Download (3.5MB)

In remarks to farmers meeting in Arlington, Virginia on Monday, Secretary of Agriculture Tom Vilsack endorsed a request to the Environmental Protection Agency for an increase in the ethanol blend rate up to 15 percent.

“We can move fairly quickly to move that rate up from 10 percent to maybe 12 or 13 percent in the interim and then take an even further jump to 15 percent or even 20 percent over the course of the next couple of years,” Vilsack said to the National Farmers Union (NFU) convention. The ethanol industry formally petitioned the EPA to increase the blend level to 15 percent on Friday. Growth Energy, one of the groups requesting the increase, recently hired NFU president Tom Buis as CEO, effective next week.

Meanwhile, the agriculture directors of 10 Midwestern states sent a letter to President Obama Monday also endorsing the acceptance of 15 or 20 percent ethanol blends.

The letter reads, in part, “American ethanol production has nearly reached 10 percent saturation. We must move to a base blend of 15 or 20 percent in 2009 in order to continue growing this vital industry. By working together to promote domestic production and improve market access, we can continue to deliver a clean, renewable fuel that has a positive impact on our domestic economy.”

Letter signers include the heads of state agriculture departments in South Dakota, Iowa, Nebraska, Wisconsin, North Dakota, Kansas, Minnesota, Michigan, Montana and Ohio.

The U.S. Department of Agriculture will be providing loan guarantees to help the ethanol industry, according to Secretary of Agriculture Tom Vilsack.

At last week’s USDA Outlook Conference, Vilsack said the USDA “has a responsibility for keeping an eye on that industry” to maintain an infrastructure to produce the next generation of biofuels.

Vilsack also says USDA is working with the Department of Energy to support research efforts to identify new feedstocks for biofuels to take some of the pressure off the food versus fuel discussion. “My view is that we have the capacity and the ability to do both and need to do both. If we’re to meet the President’s instruction that he wants more energy production out of our farm fields and ranches, and if we are going to turn this economy around and become less reliant on fossil fuels, we’ve got to create more biofuel.”

In addition to biofuels, Vilsack stressed USDA support for all forms of renewable energy, including wind and solar, “to continue the momentum of building and sustaining an energy industry within USDA and within farming and ranching.”

Exports of the primary by-product of ethanol production are continuing to skyrocket.

According to USDA’s Foreign Agriculture Service, exports of distillers grains from the United States nearly doubled last year, up more than 90% from 2007 to total 4.51 million metric tons. Distillers grains are an ethanol co-product used as livestock feed.

About one-third of every bushel of corn used to produce ethanol becomes distillers grains, which Renewable Fuels Association Vice President of Research and Analysis Geoff Cooper says have become a very valuable co-product for ethanol producers. “This increasing production and use of distillers grains is providing livestock feeders across the globe with a high protein source of feed that can partially displace the need for whole corn and soybean meal in feed rations,” said Cooper. “As a result, distillers grains are an important and often overlooked component of both the fictitious debate about food versus fuel and the ongoing discourse surrounding the science of land use change.”

The largest markets for exports of distillers grains from the United States in 2008 were Mexico, Canada and Turkey.

Despite bankruptcies and attacks by environmentalists, the outlook for ethanol is improving, according to the chairman of USDA’s World Agricultural Outlook Board.

USDA’s February corn outlook says ethanol blender and producer margins have recently improved and weekly production of gasoline blends with ethanol is on the rise.

“We’ve seen relatively lower corn prices as of late and even producers now are going to go back in the black as opposed to being in the red before,” Outlook Board Chairman Gerald Bange said. “Whereas just a few weeks ago there was no real incentive to produce ethanol using either corn or sorghum, what we’re seeing now is somewhat positive returns for the production of ethanol. So things are looking a little bit better in the ethanol industry.”

Bange says the current blending credit is sufficient to provide a positive margin for blending as well.

USDA’s Economic Research Service last week released its latest long term forecasts for the food and agricultural sector.

For ethanol, USDA projects increases in corn-based ethanol production to slow over the next few years, but ethanol demand is expected to remain high and affect the production, use, and prices of farm commodities throughout the sector.

According to the report, “continued increases are projected for corn used to produce ethanol over the next 10 years, although the pace slows from the rapid gains of the past several years. Projected gains after 2009/10 are largely in line with moderate expected increases in overall gasoline usage in the United States.”

The projections assume the tax credit available to blenders of ethanol and the 54-cent-per-gallon tariff on imported fuel ethanol remain in effect. By 2018, USDA predicts that ethanol production will account for about 35 percent of corn use and corn-based ethanol production will exceed 9 percent of annual gasoline consumption.