dubya's ethanol boondoggle news

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September 30, 2007

Ethanol’s Boom Stalling as Glut Depresses Price

By CLIFFORD KRAUSS (http://topics.nytimes.com/top/reference/timestopics/people/k/clifford_krauss/index.html?inline=nyt-per)

NEVADA, Iowa, Sept. 24 — The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading.

Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.

But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.

“The end of the ethanol boom is possibly in sight and may already be here,” said Neil E. Harl, an economics professor emeritus at Iowa State University (http://topics.nytimes.com/top/reference/timestopics/organizations/i/iowa_state_university/index.html?inline=nyt-org) who lectures on ethanol and is a consultant for producers. “This is a dangerous time for people who are making investments.”

While generous government support is expected to keep the output of ethanol fuel growing, the poorly planned overexpansion of the industry raises questions about its ability to fulfill the hopes of President Bush and other policy makers to serve as a serious antidote to the nation’s heavy reliance on foreign oil.

And if the bust becomes worse, candidates for president could be put on the spot to pledge even more federal support for the industry, particularly here in Iowa, whose caucus in January is the first contest in the presidential nominating process.

Many industry experts say the worst problems are temporary and have been intensified by transportation bottlenecks in getting ethanol from the heartland to the coasts, where it is needed most. And even if some farmers who invested in the plants lose money, most of them are reaping a separate bounty from higher prices for corn and other commodities, which are expected to remain elevated for some time.

Even so, companies are already shelving plans for expansion and canceling new plant construction. If prices fall more, as many analysts predict, there is likely to be a sweeping consolidation of the industry, and some smaller companies could go out of business.

The falling price of ethanol comes in sharp contrast to the rise in crude oil prices. Lower ethanol prices help reduce gasoline prices at the pump, where ethanol is available, but because it constitutes 10 percent or less in most blends, the impact for the consumer is marginal.

Congress essentially legislated the industry’s expansion by requiring steadily higher quantities of ethanol as a gasoline blend, a kick-start that was further spurred by the proliferation of bans on a competing fuel additive used to help curb air pollution.

( are politicians dumfucks are what? whoring for political contributions is at odds the general interest )

But the ethanol industry, which is also heavily subsidized by federal tax incentives, got far ahead of the requirements of the law, rapidly building scores of plants and snapping up a rising share of the corn harvest. Many of those plants have gone into operation in recent months, and many more are scheduled for completion by the end of next year.

The resulting ethanol oversupply is buffeting the market. Here in northern Iowa, deep in the corn belt, newly cautious farmers and ethanol executives are figuring out how to cut costs and weighing their options should the situation get worse.

“We don’t know what, ultimately, the marketplace will price ethanol at,” said Rick Brehm, president and chief executive of Lincolnway Energy, a midsize distillery here. “It could go lower.”

Since construction crews broke ground on the Lincolnway plant in 2005, the price of ethanol on the local market has fallen to $1.55 a gallon from about $2, Mr. Brehm said. Over the same period, the price of corn, representing 70 percent of production costs, has risen to $3.27 a bushel from $1.60. “We’re trapped between two commodities,” he said.

Lincolnway was once virtually alone in the region, but now a handful of new competing distilleries are operating and pouring even more ethanol onto the market, offering blenders more options to negotiate lower prices and driving up demand for corn.

“Obviously, I’m concerned about where we’re going,” said Bill Couser, chairman of Lincolnway Energy, though he added that his company is still making money and he is optimistic about the future.

The ethanol boom was set off when Congress enacted an energy law in 2005 that included a national mandate for the use of renewable fuel in gasoline, obliging the market to consume 7.5 billion gallons a year by 2012, compared with 3.5 billion gallons in 2004.

Already, ethanol producers are poised to outpace that mandate, with capacity expected to reach 7.8 billion gallons by the end of 2007 and 11.5 billion gallons by 2009, although some in the industry are now predicting that the expansion could slow.

The number of ethanol plants in the country has increased to 129 today from 81 in January 2005, according to the Renewable Fuels Association, while plants under construction or expanding have mushroomed to about 80 from 16 during the same period.

“As ethanol supply increases over the next 12 months, the challenge will be to find a home for it,” said Mark Flannery, head of energy equity research at Credit Suisse (http://topics.nytimes.com/top/news/business/companies/credit_suisse_group/index.html?inline=nyt-org). “The ethanol surplus is here already.”

Because ethanol is corrosive and soaks up water and impurities, it cannot be shipped through the country’s fuel pipeline network. So it must be transported by train, truck and barge, a more expensive transportation network that is suddenly finding it hard to keep up with the surge in ethanol production.

There is a long backlog in orders for specialized ethanol rail cars to ship the surplus production. Many rail terminals at the ethanol plants do not have spurs large enough to accommodate the long trains that ethanol promoters like to call “virtual pipelines.” And pumps from the storage tanks to the rail cars at the terminals often do not have sufficient capacity to load trains quickly and efficiently.

Phillip C. Baumel, economics professor emeritus at Iowa State University, said that in many cases ethanol producers ramped up their production so rapidly that they gave “inadequate attention to meeting transportation and distribution needs.”

( aka, the brilliance of "the market" http://spurstalk.com/forums/images/smilies/smilol.gif Just trust the market http://spurstalk.com/forums/images/smilies/smilol.gif I predict the ethanol logisitics will bulk up, and then if the ethanol market doesn't match, then the logistics industry will buy politicians to obtain more tax breaks and subsidies. stupid money chasing stupid money, paid for by citizens' tax dollars )

Gasoline wholesale marketers have been slow to gear up ethanol blending terminals, in part because they had to invest simultaneously in equipment to manage low sulfur diesel and tougher product specifications.

( don't worry, dubya will relax diesel and specifications to favor industry and fuckup people )

Prices of ethanol range widely around the country, even differing from one county to the next in the same state on a daily basis. [The average rack, or wholesale, price reported by the DTN Ethanol Center on Tuesday was $2.42 a gallon in New York and $1.77 in Iowa.] Generally, prices are highest in states farthest away from the Midwest farm belt and in ones that have federal or state clean-air requirements that encourage the use of ethanol.

In a new study, the Agriculture Department warned of “several supply chain issues that could inhibit growth in the ethanol industry,” including a backlog in rail tank car orders that grew to 36,166 rail cars by the end of the first quarter in 2007 from about 10,000 in the third quarter of 2005.

“You just can’t scale it up overnight,” said Chuck Baker, vice president and executive director of the National Railroad Construction and Maintenance Association.

( a lot of us don't think scaling up makes sense, because (corn) ethanoal makes no sense, and non-corn ethanol that makes sense is at least many years away, if then )

Stiff blending regulations in some southern states like Florida have also been an impediment to ethanol. And so far, only about 1,000 of the 179,000 pumps at gasoline stations around the country offer E-85, a fuel that is 85 percent ethanol and 15 percent gasoline, intended for the five million flex-fuel vehicles on the road that can run on high ethanol blends.

( oh yeah, how many flex-fuel cars will be on the road in the coming years? engines produce less power because ethanol is less energy dense than gasoline, and Americans love their over-powered cars. )

Major ethanol producers and lobbyists describe the developing gulf between production output and transport capacity as a temporary growing pain that will be alleviated over time.

“We have an industry that has doubled in size in just the past couple of years,” said Bob Dinneen, president of the Renewable Fuels Association. “It is going to take a little time for the infrastructure to catch up.”

Some analysts outside the industry think the current market upheaval may be more than simply a hiccup.

Aaron Brady, a director at the consulting firm Cambridge Energy Research Associates, said the current market problems could worsen if combined with other “unintended consequences that may be lurking” from increased ethanol production. He said pressure on corn and other food prices, water shortages, soil and fertilizer runoff could hurt political support for the industry.

( political support? more precisely, politicians' support )

“If Congress doesn’t substantially raise the renewable fuel standard,” Mr. Brady said, “then this is not just a short term problem but a long term issue, and there will be more of a shakeout in the industry.”

The Senate has approved a bill that would require gasoline producers to blend 36 billion gallons of ethanol into gasoline by 2022, an increase from the current standard of 7.5 billion gallons by 2012. The House did not include such a provision in the version it passed, and it is uncertain whether any final legislation will emerge this year and what it will say about ethanol if it does.

Ethanol proponents say a new energy law is virtually inevitable at some point, and that even if it does not pass this year, lower ethanol prices will provide an incentive for refiners to blend more ethanol into expensive gasoline. A higher renewable fuels standard would force refiners and blenders to work faster to process increased amounts.

A strong energy law would also increase investment and research into ethanol production from nonfood sources, like switch grass, and persuade auto companies to make more cars that run on blends well beyond the standard low percentage ethanol mixture, ethanol proponents argue.

“This is an industry that is going to continue to grow,” said Bruce Rastetter, chief executive of Hawkeye Renewables, a private company based in nearby Ames that has two distilleries and two more under construction. “Once you see an energy bill, I think you will see the industry respond again.”

( wait just a fucking minute! What about the conservative's wet dream/myth that "the free market" will cure everything? Sounds like the ethanol industry, like almost every other industry, DEPENDS on government intervention. )

Still, he has dropped plans to build a fifth plant and take Hawkeye public.

http://www.nytimes.com/2007/09/30/business/30ethanol.html

[boutons_]

September 29, 2007

As Prices Soar, U.S. Food Aid Buys Less

By CELIA W. DUGGER

Soaring food prices, driven in part by demand for ethanol made from corn, have helped slash the amount of food aid the government buys to its lowest level in a decade, possibly resulting in more hungry people around the world this year.

( you're doing a heckuva job, dubya! )

The United States, the world’s dominant donor, has purchased less than half the amount of food aid this year that it did in 2000, according to new data from the Department of Agriculture.

“The people who are starving and have to rely on food aid, they will suffer,” Jean Ziegler, who reports to the United Nations on hunger and food issues, said in an interview this week.

( fuck them the poor people! dubya's "Christian" owners hate biological Darwinism, but they love social/economic Darwinism )

Corn prices have fallen in recent months, but are still far higher than they were a year ago. Demand for ethanol has also indirectly driven the rising price of soybeans, as land that had been planted with soybeans shifted to corn. And wheat prices have skyrocketed, in large part because drought hurt production in Australia, a major producer, economists say.

The higher food prices have not only reduced the amount of American food aid for the hungry, but are also making it harder for the poorest people to buy food for themselves, economists and advocates for the hungry say.

“We fear the steady rise of food prices will hit those on the front lines of hunger the hardest,” said Josette Sheeran, executive director of the United Nations World Food Program. The United States is the biggest contributor to the agency.

She warned that food aid spending would have to rise just to keep feeding the same number of people. But the appropriations bill for the coming year now moving through Congress does not promise any significant increases in the food aid budget.

( ... in the context of dubya's $1T to grab the oil for US oilcos and dubya's $1T in estate tax cuts for the super rich )

The impact of rising food prices on food aid is part of a broader debate about the long-term impact on the world’s poorest people of using food crops to make ethanol and other biofuels, a strategy that rich countries like the United States hope will eventually reduce dependence on Middle Eastern oil.

Some advocates for the poor say rising food prices could benefit poor farmers in developing countries, providing them with markets and decent prices for their crops. But others warn that the growing use of food crops to make fuel, especially if stoked by large subsidies in rich countries, could substantially increase food prices. That could push hundreds of millions more poor people into hunger, especially landless laborers and subsistence farmers, according to a recent article in Foreign Affairs magazine. The authors were Benjamin Senauer and C. Ford Runge, food policy analysts and professors at the University of Minnesota.

Production of food crops to make biofuels will also tend to favor growers with plenty of capital and large land holdings, they say, rather than small-scale, impoverished farmers lacking modern grain storage facilities in poor countries. “The policies put in place are going to be crucial to whether the small producer and the people who live where hunger is concentrated can benefit,” Mr. Senauer said.

But for now food aid is suffering, as are poor people in poor countries, economists say. And their situation may get even tougher next year, relief agencies warn. The United Nations Food and Agriculture Organization is projecting that low-income countries reliant on food imports, including most of sub-Saharan Africa, will see the amount they pay to import cereals rise 14 percent.

The world’s ability to absorb fresh price shocks has shrunk along with food stocks. “We’re very worried,” said Henri Josserand, who heads the organization’s global information and early warning system. “World food stocks are much smaller than they used to be.”

The food aid declines may also continue. Catholic Relief Services, a major distributor of American food aid, has projected substantial increases in what the federal government pays for food aid next year, based on an analysis of the futures market for the wheat, corn and soybean products that are mainstays of aid. “It’s bad news and it’s not just going to affect U.S. food aid, but food aid from every source,” said Frank Orzechowski, a retired commodity trader who now advises Catholic Relief Services.

This year’s decline in food aid follows a period when the sharply escalating costs of shipping American-grown food aid to Africa and Asia already reduced the tonnage supplied. The United States Government Accountability Officementnd this year that the number of people being fed by American food aid had declined to 70 million in 2006 from 105 million in 2002, mainly because of rising transportation and logistical costs.

( note the US aid food exports are required to be transported by expensive US carriers, another subsidy for US corps )

Now food prices are also playing a role. New data from the Department of Agriculture show that the cost of food for the federal government’s main food aid program, Food for Peace, rose 35 percent over the past two years.

The amount of food bought for American food aid programs has fallen to 2.4 million metric tons this year from 4 million metric tons in 2005 and 5.3 million metric tons in 2000. Thomas Melito, who supervised the Government Accountability Office’s food aid investigation this year, called the escalating costs of food aid “frightening.”

( US, and European, govt agricultural price support, subsidies, and tax breaks to US agri-corps and farmers allows dump agricultural products on the world market at prices that undercut local production in non-US/European countries. US cotton farmers average $1M subsidy/year )

“In a situation where there are 850 million hungry people in the world and the program was only providing enough for 70 million people in 2006, the new totals will be even lower,” he said.

Congress is considering changes to the food aid program as part of the omnibus farm bill that some economists and advocates for the hungry say would improve the efficiency of the program and allow it to feed more people. They point to a Bush administration proposal that would allow the government to use up to $300 million of the food aid budget to buy food in African countries close to hunger emergencies rather than shipping it from the United States on mainly American-flagged vessels as current law requires.

( doesn't it make more sense to use US$ to buy LOCAL food in foreign countries, subsidizing poor local producers, avoiding round-the-plant transport costs, rather the rich US agri-business? )

In his speech to the United Nations this week, President Bush said the proposal would speed delivery and help provide a market for poor farmers in developing countries.

The House version of the farm bill includes no such provision. The Senate Agriculture Committee has not produced a farm bill.

“To my mind, that’s the way out of this pincer,” said Emmy Simmons, an agricultural economist and retired senior manager at the United States Agency for International Development.

“But the shipping guys are hanging tough,” she added. “They’re defending that little chunk of revenue. They aren’t super concerned whether you feed less people.”

( aka, "the market" at work http://spurstalk.com/forums/images/smilies/smilol.gif )

Groups representing shipping companies and agribusiness interests have opposed using the budget of the main food aid program to buy food in developing countries instead of relying on American food shipped overseas.

Gloria Tosi, who represents most of the American ship owners involved in the food aid system, said buying commodities abroad would erode domestic political support for the program and lead to lower food aid budgets from Congress. She said it was “politically naïve” to think the food commodity groups and ship owners that have for decades supported food aid in Congress would favor buying commodities abroad.

“None of us will be working toward that,” she said.

http://www.nytimes.com/2007/09/29/world/29food.html

[xrayzebra]

boutons, why are you blaming Bush? He is just doing what all
of you said you wanted. Finding an alternative fuel and he
was applauded by all the environmentalist, at first. Now if went
wrong, it is all his fault....

Cant we just get along and drill for our OWN oil? Okay, I
thought not.

[ChumpDumper]

I'm investing heavily in switchgrass futures.

[Nbadan]

http://cagle.com/working/070928/lester.jpg

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October 11, 2007
Panel Sees Problems in Ethanol Production

By CORNELIA DEAN (http://topics.nytimes.com/top/reference/timestopics/people/d/cornelia_dean/index.html?inline=nyt-per)
Greater cultivation of crops to produce ethanol could harm water quality and leave some regions of the country with water shortages, a panel of experts is reporting. And corn, the most widely grown fuel crop in the United States, might cause more damage per unit of energy than other plants, especially switchgrass and native grasses, the panel said.

The panel, convened by the National Research Council (http://topics.nytimes.com/top/reference/timestopics/organizations/n/national_research_council/index.html?inline=nyt-org), said improved agricultural practices, water recycling and other steps might reduce possible problems. But it added that “fundamental knowledge gaps” made it difficult to predict what would happen as the nation’s embrace of biofuel crops expanded. Meanwhile, it said, it would be “prudent” to encourage the use of ethanol sources other than corn.

Production of ethanol from corn kernels is on the rise, the panel said, adding that President Bush has called for the annual production of 35 billion gallons of ethanol by 2017, an amount that would account for about 15 percent of liquid transportation fuels in the United States.

But increased production could greatly increase pressure on water supplies for drinking, industry, hydropower, fish habitat and recreation, the report said. Facilities that turn plants like corn into liquid fuel would add to the pressure on water supplies, though these bio-refineries are relatively modest water consumers compared with agriculture, the panel said.

The research council, an arm of the National Academy of Sciences (http://topics.nytimes.com/top/reference/timestopics/organizations/n/national_academy_of_sciences/index.html?inline=nyt-org), issued the report yesterday. It is available at the academy’s Web site, nas.edu (http://nas.edu/). It was financed by the National Science Foundation (http://topics.nytimes.com/top/reference/timestopics/organizations/n/national_science_foundation/index.html?inline=nyt-org), the Environmental Protection Agency (http://topics.nytimes.com/top/reference/timestopics/organizations/e/environmental_protection_agency/index.html?inline=nyt-org) and other agencies and foundations.

The report noted that additional use of fertilizers and pesticides could pollute water supplies and contribute to the overgrowth of aquatic plant life that produces “dead zones” like those in the Chesapeake Bay, the Gulf of Mexico and elsewhere.


Copyright 2007 (http://www.nytimes.com/ref/membercenter/help/copyright.html) The New York Times Company (http://www.nytco.com/)

[boutons_]

Bush administration defends food-based biofuels
By MARY CLARE JALONICK
The Associated Press
Monday, May 19, 2008; 5:40 PM

WASHINGTON -- The Bush administration is defending its decision to push food-based biofuels as food costs rise at home and abroad, saying the renewable fuels are only a small part of the problem.

Some have blamed the food crisis in part on policies backed by the White House and Congress that divert corn, soybeans and other crops to fuel.
The governor of Texas and a quarter of the Senate, including the GOP's presumptive presidential nominee John McCain, asked the Environmental Protection Agency earlier this month to cut this year's requirement for 9 billion gallons of corn-based ethanol in half to ease food costs.

Agriculture Secretary Ed Schafer said Monday that the increased use of biofuels may have some small, short-term costs, but those do not outweigh the ultimate benefits of reducing the country's dependence on oil.

"It's clear that while bioenergy generation does have some effect on prices, it's not a major effect, it's not even a big effect," Schafer said.

Corn prices have grown dramatically in recent years, almost tripling since 2005. Along with high prices for other crops, they have been pushed along by the burgeoning biofuels industry as well as rising worldwide demand for food, trade barriers, bad weather in some regions of the world and other international factors.

According to Department of Agriculture economists, higher corn prices increase animal feed and ingredient costs for farmers, ranchers and food manufacturers, but pass through to consumers at a rate less than 10 percent of the corn price change. They say retail food prices would rise less than one percentage point above the normal rate of food price inflation _ 2.5 percent _ when corn prices increase by 50 percent.

White House economic advisers have said ethanol made from corn is responsible for just 2-3 percent of the overall increase in global food prices, which are up more than 40 percent this year over last year.
Opponents say that's still too much.

Texas Sen. Kay Bailey Hutchison, a Republican, on Monday introduced a bill to freeze the current mandate to produce nine billion gallons of ethanol this year. Energy legislation passed last year would require that 15 billion gallons be produced by 2015.

The Grocery Manufacturers Association, a trade group that represents Kraft Foods Inc. (http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=KFT&nav=el), Nestle SA (http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=NSRGF&nav=el), General Mills Inc. (http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=GIS&nav=el) and other large food companies, has been lobbying Congress to revisit the mandates and increase research funding for cellulosic ethanol, made from plant matter.

"Converting food into fuel is a luxury that our global community just can't afford," said Scott Faber, vice president of federal affairs for the association. "We think America needs to hear both sides of this debate."

A five year, $290 billion farm bill passed by both the House and Senate last week would make small steps in that direction, cutting a per-gallon ethanol tax credit for refiners from 51 cents to 45 cents and increasing funding for cellulosic ethanol.

Corn-based ethanol still has a lot of friends in Congress, though, and revising the mandates will be an uphill battle.

Like the administration, South Dakota Sen. John Thune says the skyrocketing price of oil is a major factor in rising food costs. And because ethanol is cheaper than gasoline, these supporters argue, it's cutting the costs for consumers at the pump.

( but murdering 100s of 1000s of poor people who have been eating from "America, the world's food basket" due to nefarious globalization that destroyed 100s of 1000s of small farms )

"When oil is traded at record highs, as it seems to do on an almost daily basis, the cost of gasoline and diesel fuel go up and with it the cost of production and shipping," Thune said.


© 2008 The Associated Press

=============

The Repugs and Congress are so fucking stupid, owned by BigAgriculture to keep the subsidies and mandates in force forever. The "free market" working its magic.