Study Offers Objective View of Food Price Drivers

Cindy Zimmerman

An agricultural public policy group is releasing a new study today that offers a comprehensive, objective assessment of the forces driving food prices.

Farm Foundation Food Price StudyThe Farm Foundation study “What’s Driving Food Prices?” was written by three Purdue University economists. Lead author Wally Tyner says that while ethanol demand is definitely the main reason for increased corn prices, the ultimate driver behind ethanol demand is higher oil prices.

“Crude oil’s strongest and most direct impact on food prices has been through its effect on the demand for biofuels,” Tyner said. “Higher oil price means higher gasoline price, higher gasoline price means more demand for ethanol because ethanol is a substitute for gasoline, and the higher ethanol demand means more demand for corn and more demand for corn means higher corn prices.”

The result has been that the price of crude oil and the price of corn are now linked, Tyner says, which is a revolution for global agriculture.

Farm Foundation 75th logoFarm Foundation president Neil Conklin says what the study shows is that today’s food price levels are the result of complex interactions among multiple factors, including global changes in production and consumption of key commodities, the depreciation of the U.S. dollar, and growth in the production of biofuels.

Farm Foundation is an independent group with a 75 year history that does no lobbying and has no allegiance to any particular agricultural commodity. Farm Foundation will host a free webinar on the report, July 30 at 1 p.m. EDT.

Read the full report here.

Ethanol, Farm Foundation, Food prices, News

Diesel Vehicles Gain Popularity, Good for Biodiesel

John Davis

Diesel-powered vehicles are gaining in popularity, despite the higher price of diesel fuel compared to regular unleaded gasoline. And that rise in interest in those vehicles is good news for the biodiesel industry.

Business Week reports sales are brisk with many makes getting into the business:

Howard Cooper Volkswagen in Ann Arbor, Mich., for example, says that a buyer putting money down today will probably have to wait until January to receive his car. Volkswagen of America plans to sell 15,000 TDI Jettas this year. Next year, VW figures to sell more than 30,000.

The diesel sedan starts at $22,640, including shipping, and the station wagon at $24,240, a premium of about $2,000 over a similarly equipped model with a gasoline engine. BMW is also going ahead with plans to launch a diesel 3 series this fall. It also has plans for an X6 diesel after that. Honda is launching a diesel engine in an Acura sedan in 2010.

Perhaps the company most fully invested in diesel engines is Global Vehicles of Alpharetta, Ga., which plans to roll out Mahindra-branded pickup trucks at the end of 2009 and the first quarter of 2010. Mahindra is the brand marketed by Indian conglomerate Mahindra & Mahindra. Some 200-plus dealers have signed up to sell the vehicles. Global Vehicles Marketing Director Xavier Beguiristain says the company is undeterred, but not unconcerned.

The obvious big attraction is the better mileage diesel vehicles get. Mahindra pickups are expected to get about 30 mpg. That’s more than 50 percent better than full-sized pickups and 30 percent better than some midsize pickups. And VW’s TDI Jetta could get up to 44 miles to the gallon.

This is good news for the biodiesel industry, as the increased production meets the increased demand (or is that the other way around?). Vehicle manufacturers do warn that using homemade biodiesel could void the warranty. So make sure to use commercially-approved biodiesel… at least until that three years, 36,000 miles is up.

Biodiesel, Car Makers

New Biodiesel Crop Becoming Cash Crop for Farmers

John Davis

A new feedstock for the growing biodiesel industry could be a cash cow for the western states where it will be growing.

Camelina is an oilseed that is growing in popularity in the more arid regions of the western United States. In fact, the profit potential is believed to be so great that the State of Colorado’s Agricultural Value-Added Development Board has just issued a $41,059 Advancing Colorado’s Renewable Energy (ACRE) Program grant, which provides funding to promote energy-related projects beneficial to Colorado’s agriculture industry.

This story from the Wall Street Journal’s Market Watch says the state money will be joined by nearly $13,000 from Blue Sun Biodiesel to aid in the research efforts:

Blue Sun is using the grant to develop camelina production practices by conducting water use efficiency trials, fertility experiments, date of planting studies and observing on-farm production. The culmination of the grant will result in a spring camelina production guide.

Blue Sun is actively breeding spring and winter camelina, through traditional breeding practices, to develop superior regionally adapted camelina cultivars for the region. Blue Sun has a spring camelina variety Cheyenne commercialized and available for sale.

“Camelina is part of the next step for biodiesel,” said Sean Lafferty, VP of Technology at Blue Sun Biodiesel. “It is a non-food crop, and it can be grown on land unsuitable for most other crops. Camelina is a good rotation crop as well and it can survive low and variable rainfall conditions, reducing risk for the farmer.”

Camelina is a non-food oilseed that is estimated could bring $80 million to Colorado’s economy.

Biodiesel

Ethanol Waiver Delay Gains Biodiesel Chief Praise

John Davis

While the EPA delay of issuing a decision on Texas’ request for a waiver from the Renewable Fuel Standard (see Cindy’s story from earlier today) is seen as good news for the ethanol industry, it is also being praised by its biodiesel brethren.

National Biodiesel Board Chief Executive Officer Joe Jobe issued this statement on the decision:

“In considering the Renewable Fuels Standard (RFS) waiver request by Gov. Perry, it is important to note that all renewable fuels qualify for the current RFS. In fact, if the RFS is waived or cut in half in 2008, then the growth of all biofuels, including ‘advanced biofuels’ such as biodiesel, will be severely hindered.

“As Gov. Perry himself pointed out just last month, alternative fuels such as biodiesel play in an important role in ‘diversifying not only our energy portfolio, but our economic landscape.’*

“Beyond the environmental and energy security benefits provided by biofuels, the opportunity for green jobs and the continued economic development of biodiesel refineries in Texas must be taken into account by the EPA when evaluating whether to waive the RFS. Unfortunately, the goal of bringing biofuels, jobs and energy independence to Texas and the nation, which Gov. Perry praised just last month, will not be realized if the RFS is waived.

Jobe also pointed out that Perry has recently praised biodiesel for “providing a necessary alternative to fossil fuels without negatively impacting our food supply.” Jobe says that was the right thing then… and it’s still the right thing now.

Biodiesel

Montana Senator Tester Supports EPAC

Montana’s Senator Jon Tester is in support of domestic fuel and Ethanol Producers and Consumers (EPAC). The U.S. Senator is a third generation Montana farmer who understands the value of agriculture to Montana’s economy and way of life. His Field Director Tracy Stone-Manning presented a letter at the recent EPAC conference in Kalispell, Montana:

Thank you all for your hard work in one of the more important efforts of our time — securing America’s energy independence.

Senator Jon TesterIt’s not just an energy issue. It’s a national security issue. And EPAC plays an important role.

I had the honor of sitting down with Shirley [Shirley Ball is the executive director of EPAC] in the Senate just last week. We discussed all the new opportunities for biofuels in Montana — and the economic growth and good-paying jobs it will bring. Opportunities for biodiesel, cellulosic ethanol, and ethanol from barley, among others.

We still have a ways to go. We still have to dial in, for expample, the right enzymes to break down cellulose. But I am confident we’ll get there. Montana is an agricultural powerhouse and we can and should lead the way in our energy future.

As a member of the Senate Energy Committee, I look forward to hearing what comes out of this conference.

Again, thanks for your hard work. And stay in touch.

Respectfully,
Jon Tester
United States Senator

Energy, Government, News

Open Fuel Standard Act Introduced

Cindy Zimmerman

U.S. Senators Sam Brownback (R-KS), Ken Salazar (D-CO) and Joseph Lieberman (I-CT) today introduced the Open Fuel Standard Act.

The legislation would require that half of all new automobiles starting in 2012 be flex-fuel vehicles warranted to operate on gasoline, ethanol, and methanol, or be warranted to operate on biodiesel. The requirement would be increased to 80 percent by 2015.

Open Fuel press conferenceNational Corn Growers Association Vice President of Public Policy Jon Doggett spoke during a press conference Tuesday to introduce the bill. “The Open Fuel Standard Act is an important piece of legislation,” said Doggett. “Flex-fuel vehicles are aptly named because they give consumers a choice. Corn producers are committed to producing more corn on fewer acres using better technology to achieve the goals of the Open Fuel Standard Act.”

Senators Susan Collins (R-ME) and John Thune (R-SD) are also co-sponsoring the bill. Also joining the senators to introduce the bill were representatives from the Set America Free Coalition, National Association of Wheat Growers and the Methanol Institute.

Pictured from left to right are: Sen. Salazar, Sen. Lieberman, Jon Doggett, and Sen. Brownback. (photo from NCGA)

Ethanol, Flex Fuel Vehicles, Government, News

EPA Delays Ethanol Waiver Decision

Cindy Zimmerman

U.S. Environmental Protection Agency Administrator Stephen Johnson announced today that the agency will not meet its July 24 deadline to issue a decision on the renewable fuels standard (RFS) waiver request submitted by Texas Governor Rick Perry.

EPAJohnson said in a statement, “Given the amount of work that remains to sufficiently answer the Texas request for a waiver from the Renewable Fuels Standard (RFS), it is now clear that a final decision on the request will not be completed by July 24. Rather, additional time is needed to allow staff to adequately respond to the public comments and develop a decision document that explains the technical, economic and legal rationale of our decision.”

EPA received over 15,000 comments on the issue and the agency is also required to consult with the Departments of Agriculture and Energy in considering whether to grant or deny the waiver request.

Johnson stated that “the process remains fair and open and no agreements have been made with any party in regard to the substance and timing of the decision on the waiver request.”

A final decision is now expected in early August.

Ethanol, Government, News

Candidate Positions on Ethanol

Cindy Zimmerman

Presidential candidates Barack Obama and John McCain spoke to the American Farm Bureau Federation’s Council of Presidents meeting in Washington DC last week by teleconference about various issues of importance to agriculture, including it’s role in America’s energy needs.

McCain ObamaMcCain heralded his “Lexington Project” to make America energy independent which includes alternative fuels, ethanol, nuclear and offshore drilling. The plan includes calling on automakers “to make a more rapid and complete switch” to flex-fuel vehicles, as well as increase support for second generation ethanol, that would involve eliminating “mandates, subsidies, tariffs and price supports that focus exclusively on corn-based ethanol and prevent the development of market-based solutions which would provide us with better options for our fuel needs.”

Obama stated that his goal would be to phase in a 2 billion gallon cellulosic ethanol renewable fuel standard into the nation’s fuel supply by 2013.

“I am not interested in rolling back the renewable fuel standard. I think it is something that is critically important to supporting the agricultural sector and rural America, and I think that the use of ethanol as a scapegoat for rising fuel prices is misplaced. If we don’t invest in American grown biofuels and advanced technologies, our nation is never going to be energy independent. And that is why I am proud to have been a consistent supporter of biofuels and I will continue to be so in the future.”

Cellulosic, Ethanol, Farming, Government, News

VeraSun Starts Up New Ethanol Plant

Cindy Zimmerman

VeraSun Energy has announced the startup of its 110 million gallon per year ethanol biorefinery located near Hankinson, N.D. The Hankinson production facility marks the 12th VeraSun biorefinery in operation, increasing the company’s annual operating capacity to 1.2 billion gallons.

VeraSunConstruction on the Hankinson facility began in August of 2006 and was completed in June. The opening of the plant was delayed due to market volatility.

“The decision to begin production at Hankinson is based on a number of factors, including an improved margin environment as well as other business considerations unique to the facility,” VeraSun CEO Don Endres said. “We continue to closely monitor market conditions and make decisions that are in the best interest of our company.”

VeraSun took ownership of the facility through its merger with US BioEnergy, which became final in April.

Ethanol, Facilities, News

Verenium Advances Cellulosic Ethanol in Asia

Cindy Zimmerman

VereniumUS biofuels development company Verenium Corporation and Japanese trading company Marubeni Corporation recently announced the opening of a three million-liter-per-year cellulosic ethanol plant in Saraburi, Thailand.

MarubeniThe cellulosic plant in Thailand is co-located with a facility that will produce ethanol from sugar-cane derived sucrose, which is widely abundant in the region. Sugar cane bagasse, the biomass residue from the sugar cane plant, will be the primary source of feedstock for the cellulosic facility, which will be converted into ethanol using Verenium’s process technology.

Marubeni and Tsukishima Kikai Company previously incorporated Verenium’s technology into BioEthanol Japan’s 1.4 million-liter-per-year cellulosic ethanol plant in Osaka, which utilizes construction wood waste as a feedstock.

Cellulosic, Ethanol, Facilities, International, News