Corn farmers and the ethanol industry thought they had put the food-versus-fuel battle to bed last year when Congress passed legislation dramatically expanding the amount of ethanol that oil refineries had to blend with their gasoline.
But in recent weeks, as world oil prices skyrocketed and food prices jumped to new highs, the ethanol industry has become the new whipping boy for many of these economic woes.
Connecticut Gov. M. Jodi Rell was one of the first governors — after Gov. Rick Perry of Texas — to ask Congress to temporarily waive the ethanol/gasoline standard to help quell rising food and energy prices.
“Connecticut families and businesses are getting bruised by the soaring cost of everyday necessities, like gas and groceries,” Rell said in testimony May 1, a week after Perry, a Republican, sought a partial waiver of the ethanol rules for Texas. “One major factor in this unhappy duet is the price of corn — demand for the crop as a source of ethanol is competing fiercely with demand for corn as food, additives in products such as soft drinks and animal feed.
Farmers Pick Corn
“Not only are those price pressures playing havoc with consumers,” she continued, “but the demand for corn is also driving up costs of other major crops like rice, wheat and soybeans. Farmers looking for a good price are opting for corn instead of other crops or altering their crop rotation patterns, so production of other grains is affected.”
This month, seven congressional committees have held hearings on the link between the renewable fuel standard and high food prices. Twenty-three Republican senators, including presidential candidate John McCain of Arizona, sent a letter to the U.S. Environmental Protection Agency asking it to use its rule-making authority to waive or revise the new requirement.
All the negative publicity has some biofuel supporters concerned the commotion could scare off investors who will help finance new plants and research needed to move the industry away from corn as ethanol’s main ingredient.
“Anytime there is uncertainty with regard to what the rules are going to be … it’s going to have an impact on investment,” said Sen. John Thune, R-S.D. “It will start to dry it up. Then you have to answer the question — then what? Does it mean you have to import that much more oil?”
Some of the negative publicity against ethanol is being whipped up by the Grocery Manufacturers Association, which has expanded its lobbying effort.
“Congress needs to revisit these mandates to ensure that we’re not pitting our energy needs against the needs of the hungry and the environment,” association spokesman Scott Faber said. “It’s not particularly unusual that groups are leaving no stone unturned in their effort to ensure that both sides of the story are reaching legislators.”
The Standard
But Brian Jennings, executive vice president of the American Coalition for Ethanol, said the debate has turned emotional and one-sided. “It’s become a hysterical discussion, focused solely on ethanol that neglects the much larger, more problematic factors causing higher food prices,” he said.
It’s a quick reversal of fortune for the industry, which in December was buoyed by passage of what’s known as the renewable fuel standard.
That standard mandates the nation’s oil companies blend at least 15 billion gallons of corn ethanol with their gasoline by 2015 and 21 billion gallons of cellulosic ethanol, which is made from inedible things like wood chips and corn cobs, by 2022.
Now petroleum refiners, food manufacturers, world hunger groups and others are pointing to rising food prices worldwide as justification for delaying the new requirement. They argue that the government’s requirement and subsidies to the ethanol industry encourage farmers to grow corn instead of wheat and other commodities, driving down the supply and increasing prices.
One big reason Congress adopted the new fuel requirement was to lessen the nation’s dependence on foreign oil. Currently, about 5 percent of the nation’s motor vehicle fuel is ethanol. That percentage will grow to 30 under the renewable fuel standard.
Critics say they don’t oppose biofuels. They oppose the mandate and the government subsidies, which amount to 51 cents per gallon for fuel blenders. Bill Holbrook, spokesman for the National Petrochemical and Refiners Association said oil companies have long mixed ethanol with gasoline to make it run cleaner.
