Hundreds of media reports were generated Monday based on USDA’s Prospective Plantings report showing an expected eight percent decline in corn acres compared to last year. Headlines squawked over higher food prices and much more gloom and doom to be expected as a result of this projected drop, including tighter margins for ethanol producers.
The forecast now is for 86 million acres of corn - which as the National Corn Growers Association points out - is still the second-highest acreage intention since 1949. Besides that, its best to keep in mind that this is only the very first guess by USDA of planting intentions, and they have been known to be wrong.
“We’re always cautious when we review the March projections, because they are made before any seeds really enter the ground,� said Ron Litterer, NCGA president. “The corn acreage projections also have a tendency to go up. Last year, for example, there was a difference of more than 3 million acres between the March estimate and the final number.� Litterer pointed out USDA’s March report has underestimated actual corn acres in the each of the last four years.
The March USDA report would indicate approximately 79 million harvested acres. If the average trend yield of 155.5 bushels per acre is realized, corn producers would be on track to produce approximately 12.3 billion bushels in 2008 – the second-highest production ever. The USDA’s June 30 report will provide a clearer view of 2008 corn acreage.
This “Ethanol Report” podcast features comments from four ethanol industry leaders about the future of the ethanol industry and what role the Renewable Fuels Association will play in it.
Commentators include RFA Vice Chairman Tom Branhan of Glacial Lakes Energy in Watertown, South Dakota; Renewable Fuels Foundation chairman Bill Lee with Chippewa Valley Ethanol in Minnesota; RFA and RFF board member Dan Schwartzkopf with ICM’s LifeLine Foods; and Ryland Utlaut of Mid-Missouri Energy, a board member of RFA and past chairman of the National Corn Growers Association.
You can subscribe to “The Ethanol Report” by following this link.
Or you can listen to it on-line here: 
Ethanol Report 9 (6:30 MP3 file)
Legendary oil investor T. Boone Pickens was on CNBC earlier this week talking about energy and oil prices.
According to Delta Farm Press, his comments about ethanol did not receive very much media attention, but they are certainly interesting to the ethanol industry.
Pickens, who admitted he once opposed ethanol, said on CNBC’s daily “Squawk Box� program that America’s purchases of foreign oil are costing the country a half a trillion dollars every year.
“You take 10 years, and you have $5 trillion,� said Pickens. “That’s more than $1 billion a day. We can’t stand that.� (That $500 billion per year is not far from the record federal deficit of $552 billion in 2004.)
Ethanol industry leaders have been saying the United States needed to reduce its use of foreign-produced oil to avoid transferring such wealth out of the country. But few have put it in such dramatic terms as Pickens.
Acknowledging he didn’t think much of ethanol’s claims in the early years, he said he now supports increased production. “I’d rather have ethanol and recirculate the money in the country, than to have it go out the back door on us.�
How much corn will farmers plant is the multi-million dollar question on the minds of lots of people right now - one that will be answered to some extent when USDA’s prospective plantings report is released Monday morning.
Business Week did an article about those who are eagerly anticipating the report - from livestock producers to the ethanol industry to market analysts.
Here are a couple of quotes from the article:
“Everybody is looking to see what that report is going to look like,” said Bob Dinneen, a spokesman for the Renewable Fuels Association. “Everybody is anxious, us included.”
Mindy Williamson, a spokeswoman for the Iowa Corn Growers Association, said the ethanol-fueled demand for corn has changed the dynamics.
“Before we weren’t in a demand-driven market,” she said. “Now, it’s all about demand and you have a choice about where we want to sell (corn) and who you want to sell it to. There are still other things beyond farmers’ control, like weather, but it’s a good time.”
The chief executive officer of the world’s largest food and drink company has given new meaning to the word hyperbole.
Peter Brabeck-Letmathe, CEO of Swiss food giant Nestle, is quoted in various news reports saying, “If as predicted we look to use biofuels to satisfy 20 percent of the growing demand for oil products, there will be nothing left to eat.”
He also called planned subsidies for biofuels “irresponsible and immoral” and “political insanity.”
The last sentence in the story on Forbes website from Thompson Financial News makes a good point.
“Thus far Nestle has been successful in passing on a strong hike in raw materials prices, including milk, cacao and corn, to its clients.”
A new report from the Consumer Federation of America (CFA) blames higher gas prices on major U.S. oil refiners creating tighter markets.
“For half a decade the major oil companies have exercised their market power,” said Dr. Mark Cooper, research director of CFA and author of the report. “In response to record high prices, consumers are cutting their consumption and lower priced alternatives, like ethanol are expanding supplies. But these market responses are being counteracted by high crude prices driven up by speculators and reduced oil company refinery runs.”
According to the report, ethanol is one of the key factors affecting the gasoline market.
Today, two-thirds of all gasoline sold in the U.S. is blended with ethanol. However, the use of ethanol still falls far short of the maximum allowed for conventional engines. If all gasoline sold were blended to 10 percent ethanol, ethanol use would be 40 percent higher than it is today. Such an increase would equal over 200,000 barrels per day and production capacity is projected to increase by almost that much in 2008,14 which reinforces the fact that the primary structural factor that may alter the domestic situation in the near term is the supply of alternative fuels, rather than recession driven changes in demand.
Cooper calls on policy makers “to shine a spotlight on the industry so it does not cut back on refinery runs to tighten the market, and they need to ensure that the 2007 “Energy Independence and Security Act” is implemented vigorously since it emphasized the two key long-term elements that can help consumers escape from the grip of both the domestic refining oligopoly and the crude oil cartel – expansion of alternative fuels and reduction of demand through increased fuel economy.”
Read the full report here.
Recently, the American Bakers Association and other food processing groups have erroneously and disingenuously blamed ethanol for the rise in prices for all foods. Specifically, the bakers have cooked up a line that American farmers are now planting more corn for ethanol production at the expense of wheat acres. However, the National Agricultural Statistics Service (NASS) notes that 2007 saw the highest number of wheat acres planted in the past four years. Farmers planted more than 60 million acres of wheat last year, up more than 3 million acres from 2006. (Source: NASS Crop Production 2007 Summary report)
The two major factors driving the wheat market today are the consecutive droughts in Australia, a leading wheat producer and exporter, and growing global demand. As David Streitfield noted recently in an article in the New York Times, “Now [wheat] prices have more than tripled, partly because of a drought in Australia and bad harvests elsewhere and also because of unslaked global demand for crackers, bread and noodles. In seven of the last eight years, world wheat consumption has outpaced production. Stockpiles are at their lowest point in decades.�
“The idea ethanol production is the driving factor behind high wheat prices is half-baked,� said Renewable Fuels Association President Bob Dinneen. “American farmers increased their wheat production in 2007 at a time of poor harvests and surging demand around the globe. To single out the American ethanol producer ignores the facts.�
In conveniently coincidental attempts to discredit the benefits of domestic renewable ethanol production and use, representatives from the nation’s petrochemical, corporate livestock, and food processing industries have made frequent public statements disparaging America’s farmers and ethanol producers.
Recent comments by corporate officers from Valero, Pilgrim’s Pride, Tyson’s, Smithfield and others have portrayed ethanol as the primary cause of rising commodity and food costs. The rush to make ethanol the scapegoat for all these ills completely ignores the complexities of world agriculture and energy markets and the many factors behind higher food prices, not the least of which is the record price of oil.
“To put the blame for rising commodity, food and energy prices solely at the feet of the American ethanol industry is misleading and diversionary,� said Renewable Fuels Association President Bob Dinneen. “This kind of overheated, chicken little rhetoric is meant to distort the truth and deliberately misinform the American public. Fortunately, the American people see through these smokescreens and understand that this nation must break its addiction to oil. The consequences of failing to do so, like record oil prices well in excess of $100 barrel, are too great. Biofuels like ethanol represent the beginning of that long journey.�
Some examples of the phony claims being made by officials from these industries include: (more…)
The state that started the move toward petroleum is now joining the movement to help reduce our nation’s addiction to oil. With the cooperation of the state of Pennsylvania and the full-throated support of Governor Ed Rendell, BioEnergy International is breaking ground on the state’s first ethanol biorefinery.
Located in Clearfield, the facility, once completed, will produce 110 million gallons of ethanol annually. Beginning as a corn-based ethanol production facility, BioEnergy will also conduct onsite research and testing to integrate cellulosic ethanol production technology into its operations. Cellulosic ethanol production is the conversion of nonfood biomass materials such as switchgrass, corn stalks, wood chips and other agricultural waste materials into fuel ethanol.
“It is apropos that the state that gave birth to the petroleum industry is now front and center in our nation’s efforts to reduce our dependence on imported oil,� said RFA President Bob Dinneen. “Led by Governor Rendell and the forward-thinking leaders of the state, Pennsylvania is poised to capitalize on the productivity of its farmers to supply a wide range of feedstocks for an ever-evolving domestic ethanol industry. As a result, rural Pennsylvania will see the kind of economic opportunities witnessed by countless small communities across the country and our nation will be another step closer toward energy self-sufficiency. I congratulate Governor Rendell, the people of Pennsylvania, and BioEnergy International for working constructively together to bring the benefits of ethanol production to mid-Atlantic.�
The latest report from the Energy Information Administration (EIA) concludes that ethanol will reduce U.S. petroleum demand by 130,000 b/d in 2008.
According to the EIA’s Short-Term Energy Outlook:
“The slowing economy combined with high petroleum prices is expected to constrain growth in U.S. consumption of liquid fuels and other petroleum products to just 40,000 barrels per day (bbl/d) in 2008. After accounting for increased ethanol use, U.S. petroleum consumption falls by 90,000 bbl/d.�
This news from EIA comes at a time of decreasing U.S. petroleum production and an unabated rise in world oil prices that shows no sign of slowing down. Continued geopolitical instability, growing demand from emerging nations like China and India, and a weakening dollar are all contributing to the meteoric rise of oil prices. EIA estimates crude oil will average $94 a barrel in 2008, up from $72 a barrel in 2007.
“America’s ethanol industry is living up to its end of the bargain by helping reduce petroleum use and moderate prices for Americans at the pump,� said Renewable Fuels Association President Bob Dinneen. “The nearly 8 billion gallons of ethanol being produced on an annual basis today is a vital component of our nation’s gasoline supply, adding volume and helping to mitigate the price increases that will occur as oil continues its meteoric rise.�
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