An economist who makes his living forecasting the future of oils and oilseeds says that the supply of fats and oils in the world is not enough to keep pace with demand. According to a Bloomberg article, Thomas Mielke of Oil World says that between the increasing demands for both food and fuel, “There is a supply-demand deficit that is slowly worsening and the real impact is still to come.”
Mielke specifically addresses the use of products such as soy oil and palm oil for biodiesel and corn and sugarcane to make ethanol. “We cannot solve energy problems with oils and fats,” Mielke said. “If you look at five-year accumulative demand trends starting 1981, there has been an alarming acceleration in demand for the world’s 17 major oils and fats. There’s going to be more and more competition for new acreage from grains and sugar for oilseeds.”
So, either we have to grow more, use less, or find other sources.
Duties Call
Demand for ethanol is up and it is becoming evident that domestic production will not be able to supply it all. So, the possibility of lifting the current import tariffs on ethanol, particularly from Brazil, is being raised in Washington.
A Reuters article today says “Congress seems unlikely to lift import duties on much-needed ethanol to meet a domestic shortfall in the fuel additive due to opposition from U.S. producers and farmers.”
However, the article also goes on to say that Senator Saxby Chambliss, head of the Senate Agriculture Committee, told Reuters on Tuesday that Congress has no plans to consider tariff cuts this year, but he said such a move was not out of the question. “We’d be foolish not to consider it … if it benefits the energy community, particularly if at the same time it benefits our farmers,” Chambliss said. U.S. Agriculture Secretary Mike Johanns said this week he had not discussed lifting the tariffs on Brazilian ethanol.
Just because the “farm lobby” is against lifting the import duty doesn’t mean it’s not going to happen. The very powerful sugar industry was adamently opposed to the CAFTA-DR and lobbied heavily against its passage by Congress – but it did pass. So, it is possible.
Even though, as the article notes, Brazil is “slapped with a 2.5 percent ad valorem tariff and a second duty of 54 cents per gallon” on its exports of sugarcane-based ethanol to the U.S. – shipments from Brazil are expected to range from 60 million to 70 million gallons this year. Point being, there is nothing actually stopping Brazilian ethanol from coming here, the tariffs are simply designed to offset “the 51 cents per gallon tax credit the United States provides for blending 10 percent ethanol into gasoline” which may or may not be fair, depending on your viewpoint.
The article also quotes Renewable Fuels Association president Bob Dineen on the issue admitting that domestic production will not be able to meet demand, but still opposing the lifting of import tariffs.
Dinneen said supply problems that may result are no reason to lift duties on Brazilian ethanol imports, as the Brazilian government already subsidizes its domestic ethanol producers. “The Brazilians would love to have us subsidize their product (by easing our duties). But I don’t see a serious effort to do that in the Congress,” he said.
That may change and the ethanol industry may have to accept some compromise on the matter. But, like any industry – from cotton to steel – they are going to be protective of their protection and want to hang on to it for as long as possible, which is to be expected.
Takes Fuel to Make Fuel
The Ft. Lauderdale Sun-Sentinel ran an article Sunday that originally ran in the N.Y. Times on February 7. It’s headlined “It takes fuel to make fuel” and I am surprised that I haven’t seen it in any other NYT company papers considering the hype over ethanol and the Ames, IA dateline.
The article is all about how turning corn into ethanol requires natural gas and the research that is being done to make ethanol more cost-effective. Two potential solutions are offered to using less natural gas in the production of ethanol – using cow manure or corn stover.
The article talks about work being done at Frontline Bioenergy in Ames, which has as it’s mission statement “…to lead the nation in biomass gasification solutions for energy and products” and the cute little leaf logo you see on this post. It quotes Frontline’s research and development manager John Reardon on their gasification project, “It’s just a step. But our whole economy is based on fossil energy, and we have to make a step somewhere.”
That’s how it will all be done – a step at a time. Our dependence on fossil fuels may be an addiction, but it’s not one we can quit cold turkey. We have to cut down gradually, a step at a time, to wean ourselves like babies. But it can be done.
Thanks to Gary Dikkers for sending me the article.
Investors Interested in Ethanol
The headline for the article is “Wall Street storms the Corn Belt to build new ethanol plants,” and it makes it sound like ethanol plants are the hottest investment since dot-com. Don’t know if it’s THAT huge, and hopefully not that short-lived, but no doubt it is getting a bit easier to find investors for ethanol plants than it was even just a year ago.
Dueling Ethanol Editorials
Here’s an addition to the editorials pages about ethanol. The Jefferson City (MO) News Tribune two very long dueling editorial about the pros and cons of the ten percent ethanol mandate being considered by the state legislature. The pro side was written by Missouri Corn Growers Association CEO Gary Marshall. The opposing viewpoint was written by Ron Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association.
Both arguments are pretty predictable considering the lobbies they represent, but interesting reading just the same.
Ethanol Editorials
Ethanol is fueling editorial fodder nationwide. Here are links to just a handful of today’s editorials about ethanol around the country – both positive and negative.
From the Washington Post – Ponying Up for Alternative-Fuel Research
From the Denver Post – Be careful what you wish for
From the Joplin (MO) Globe – Why don’t we grow energy?
From the Daily Press (VA) – Cornstalks are essential, not ‘waste’
From the Detroit News – E85 fuel has big appeal, but do numbers add up?
From the Sacramento (CA) Bee – The Carbohydrate Economy
Washington Farm Report on Ethanol
Here is a link to today’s Washington Farm Report in the Des Moines Register which discusses the research into how much energy it takes to make ethanol from corn, as well as the benefits of switching to cellulosic ethanol in the long term. Makes some very good points. Philip Braser writes about agriculture policy
and issues for the Register.
Marine Methanol Question
I got a comment to a post that I would like to draw attention to because I can’t find the answer to his question myself. If anyone can help, please comment. Thanks.
John Williams says:
I hope one of your readers can fill me in on a paticular aspect of fuel attributes. I operate a marine fuel dock in RI and I’ve recently learned we will be changing from MTBE to methanol in the next few months. I’m having difficulty finding an unambigious procedure to advise my customers on what precautions to use in order to avoid having phase seperation ( water )occure in their fuel storage tanks. They range from 6 gal to 250 gal. If ethanol is used, a simple water separator would be effective however the rumor around the docks is that if a supplier provides methanol as the additive the chemistry becomes more challenging to separate. My customers travel to offshore sites to fish and if problems develope out there it’s tough to stop in the breakdown lane. This saefty issue in marine fuels is the focus of my inquiry and I would appreciate any insight or remarks your readers would offer. Thank you for your time.
Cutting Fertilizer Use Goal of New Energy Estimator
USDA has released it’s new Energy Estimator for Nitrogen to help farmers and ranchers identify potential nitrogen cost savings associated with major crops and commercial nitrogen fertilizer applications. According to the USDA news release, nitrogen fertilizer is one of the largest indirect uses of energy on an agricultural operation. Fertilizer accounts for 29 percent of agriculture’s energy use, according to USDA research data. Proper management of nitrogen fertilizer, including the use of organic sources of nitrogen such as animal manure and cover crops, can save producers energy and money.
So, the government is encouraging farmers to find alternatives to nitrogen fertilizer, or at least to use less of it. That will also help make us more energy independent in the long term.
The new Energy Estimator can be found here.
I will probably have an interview on this topic with USDA Natural Resources Conservation Service Chief Bruce Knight next week. Any questions you would like me to ask him?
(Note from Cindy: My interview with Bruce Knight was cancelled last week because of scheduling and the fact that he had laryngitis. I have interviewed “the chief” three times since the first of this year so at this point we are probably not going to do this particular interview after all. Maybe at a later date.)
Loan Guarantee to Fund Biodiesel Plant
A Clinton, Iowa biodiesel plant is getting a $3.2 million loan guarentee from USDA’s Rural Development Agency, according to a release from USDA today. The Rural Development Renewable Energy Systems loan guarantee will be used to partially fund construction and operation of a biodiesel production plant with a yearly capacity of 10 million gallons. The plant will use over 7 million bushels of Midwestern grown soybeans a year. Additionally, the plant will use its own by-products to provide much of its energy supply. It is owned by Clinton County Bio Energy, LLC, which includes local farmers and business operators. When completed, the plant will provide at least nine new jobs. It is the first production facility to be located in a new 233 acre industrial park in Clinton. USDA also announced the awarding of 14 energy-related grants today – most for various power project in Alabama, Alaska and Arizona. Must be going in alphabetical order…