Posted on 10/15/2007 4:50:41 AM PDT by decimon
It's like another gold rush, but is the race to grow crops for bio fuels such a field of dreams?
In the flatlands of the American interior, grain is flying off the fields. Corn, wheat and barley are thrashing through combines.
And to watch the farmers behind the harvest, you would think you were on Wall Street instead of Green Acres. Members of the boots-and-baseball hat crowd sound more like tassel-loafed brokers on a binge, spinning straw into gold. And in a sense, they are.
Welcome to the latest field of dreams. Farm prices have not been so high in a generation. Wheat has more than tripled from the price of a few years ago. Corn is up 80% or more.
I bring you this news from the farm, not as a discourse on why breakfast cereal may soon cost a bit more. But rather, consider this as another variation of the old saw about being careful what you wish for. Or perhaps it's simply a tale of supply-and-demand economics.
For years people in rural America have been touting ethanol as the best path to energy independence. It's easy to make. It's just refined alcohol, usually processed from corn.
There's a seemingly endless supply of it. It doesn't involve sending billions to foreign despots. It doesn't release as much carbon into the atmosphere as petrol-based fuels do. And for years, most everyone else rolled their eyes and continued to fill up their SUVs with cheap gasoline, ignoring ethanol.
It was a niche, at best. A political bargaining chip for farm states during presidential election years. See Iowa and ethanol - two words that tumble out of the mouths of political candidates with quadrennial regularity. But as oil prices have crept past $80 a barrel, that fuel from the farm started to look a lot better.
At the same time came hefty tax breaks, government mandates to quadruple ethanol production and Wall Street venture capital sniffing around the edges of the prairie. Just like that, the old scarecrow patch became a lot more profitable.
Now 129 plants are making ethanol, mostly in small towns dotting the American mid-section, and another 80 are under construction. Half the states in the US have ethanol plants and it may soon be the leading producer in the world of this home-grown fuel - right up there with Brazil, which makes its fuel from sugar cane.
Moonshine
That ka-ching you heard was coming from farmers making high-performance moonshine from amber fields of grain. In their vision there will soon be a "grass station" in every town, powering a fleet of new cars running on bio fuels.
What's left over might even be used for traditional moonshine. That is, grain alcohol. A plant in small-town Minnesota does just that, producing a high-end vodka in addition to several million gallons of transportation fuel.
One of the farmers I spoke to in the Interior West, a fellow named Read Smith, brought up the other reason people who work the land are so excited about ethanol: the prospect of a renaissance in rural America.
An evangelist for ethanol, Smith was so excited I had to check for dirt under his fingernails to make sure he was a farmer. Towns, now dying, would get a fresh lease on life through ethanol, he said.
The shuttered factory could re-open, with minimal investment, as a farmer-owned refinery, taking Jed's corn to make Jeremy's tractor fuel. Young people, now leaving in droves, would stay behind, lured by the promise of a new, $700bn-a-year industry.
On top of that is the draw of economic nationalism. Not long ago I drove through a small town in Missouri, where a new ethanol plant is the pride of the community.
A yard sign, showing a picture of corn, a gas pump and the American flag, carried the slogan: Our Crop. Our Fuel. Our Country. The not-so-subtle implication, which you hear farmers mention time and again is - stick it to those Arab oil billionaires.
The goal of the ethanol enthusiasts is to have farmers and foresters produce 25% of American energy by the year 2025. As it stands, the US now makes about six billion gallons of ethanol. It's barely enough to replace a mere 4% of the nation's gasoline consumption. And most of that is used in blends.
The "Big Vision" sounds wonderful to farmers who have long complained about bad weather, bad prices, bad rural economics, bad global economics, or some combination of woe.
Protests
Hard times in the wide open spaces date to the Dust Bowl storms of the 1930s. Since then, more than half of the counties in the western Great Plains have lost population - a steady drip, drip, drip of out-migration and loss. Banks are boarded up. Stores are shuttered. Schools are closed, never again to hold a child's voice.
So, you can see why ethanol is greeted as the salvation of the rural economy. But reality has intruded. This new fuel, after all, comes from food. Corn is used for everything from cereal to soda pop. Corn fattens hogs and chickens and cattle. So, of course, as the demand for corn in bio fuel has soared so too have food prices.
This makes corn farmers happy, but everybody else in the food production chain is not. Earlier this year there were large protests in Mexico by people who claimed that ethanol demand had caused tortilla prices to double.
Whether ethanol is truly to blame for higher food prices is debatable. No one ever thought it would take off this quickly and the market may be in for a settling, which will level prices. Still, enough economists say there is a lesson here - you can't have your fuel and your food come from the same source.
Also, environmentalists have weighed in, pointing out that while ethanol is much cleaner than fuels that come from oil, it is not the panacea for global warming.
The process of converting fields into corn and then into fuel requires intensive amounts of fertiliser and old-fashioned petrol in the refining - ultimately adding to the carbon in the atmosphere.
A cleaner method - the sort of Holy Grail of ethanol - is the process of making fuel from straw, or field waste, or wood chips. This is not a pipe dream. It can be done, as a small plant in Canada and other projects in Europe have demonstrated.
But the price, for now at least, is prohibitive because the processing is so much more difficult, although the hope is that costs will come down.
And of course, big oil has cast its shadow over the "field of ethanol dreams". The oil industry initially tried to get in on the boom. Most ethanol plants are now farmer-owned co-ops. The little guy can actually produce ethanol cheaper than the big guy.
Failing to get a toehold on the farm, the oil industry has since funded an anti-ethanol campaign. All sorts of so-called "experts" - many, it turns out, on the payrolls of oil companies - have been sounding alarms about bio fuels. But to be fair, some oil companies are still trying to partner with ethanol producers.
Cold and fallow
But perhaps the biggest blow yet has come from the free market. If it looked like a good thing to plough up prairie grass and plant corn for the ethanol boom in Kansas, it also looked the same way in Missouri, or Idaho.
I met a farmer outside the one-stoplight town of Burley, in the high desert of the Interior West, who told me he was going to rip out all his hay, which requires very little care, and plant a special kind of corn so he can make a killing in the ethanol boom.
Yes, sir, he told me - it's a sure thing. Right. Just like all gold rushes. Now, guess what? There's a glut. In fact, there's a huge glut.
Farmers and the small towns that service them built their refineries nearly overnight. But at the other end - cars that use ethanol, stations that pump it and actual consumers who will trade in their gas-fired rides for moonshine motors - they have not kept up.
So, while food prices remain high, ethanol prices are trending downward, off nearly 30% on the spot market since May. So, is this the beginning of the end of the big ethanol dream? Killed, just as it got going?
Most farm economists say no - ethanol will find its place. Now, maybe it won't replace all the imported oil - more than half of US consumption - and maybe it won't save the planet. Such overstatements, critics believe, set ethanol up for a fall to begin with.
But even if we can't farm our way to energy independence, it's a start toward a more local energy economy - connecting consumers to producers.
That may be enough to keep people on the land, people who dream of putting something in the ground just as it goes cold and fallow. Because, more than anything else, they are farming tomorrow.
Ya think?
This looks a good synopsis of the current state of the ethanol thingy.
“I bring you this news from the farm, not as a discourse on why breakfast cereal may soon cost a bit more.”
A bit more? Corn is the basis for most of our agriculturally based prodicts...starting right on down with animal feed. Prices of products having anything remotely to do with corn will go up significantly if ethanol becomes our standard fuel.
Converting food to fuel is insane.
We get less of our oil from the ME than anyone. Why we have to suck up, kneel to these thugs is beyond me. Let the Europeans butter their arses, oh, wait they already do. Well, let them lower the landing fees for the weekend whore flights from SA to Hamburg. Or, some other equivalent, huge sacrifice, for those limpwrists.
Yes - one of the most balanced articles on the subject I have read. I am sure the anti-ethanol pundits here on FR will find plenty of faults... (possibly quoting from some of the “Big Oil” experts...).
Bought beef lately?
Calling all "Field of Dreamers". Please weigh in with your investment tales. You know, like "I invested $25K in a local ethanol plant one year ago and I've already gotten my back and been offered $50K to take me out."
From the BBC?
< /shocked >
Bush looks like his pucker is up to his chest.
OK, I'm in the O&G biz and I absolutely love ethanol. You wanna know why? It takes huge amounts of natural gas to produce, so now I have a GROWING market that helps keep natural gas spot prices high.
coal, nuclear, hydrogen.
The fault I would find is in subsidies from states and from the Feds. Subsidies gouge the taxpayer and stifle innovation.
And maybe from an American, too (note the use of 'gasoline' and 'corn').
ping?
No-one is converting food to fuel. They are cashing in on a subsidy.
Without that subsidy, ethanol would stop being a fuel and start being seen for what it is: a fuel dilutant (and moreover, a dilutant that damages cars).
America needs to drill for its own oil. Subsidising Ethanol production is an exercise in futility.
An Inconvenient Ethanol Truth
....and with a smaller available supply of oil to be sold in the United States, the price would go up.
Not true. Only those using whole corn and the carbohydrate fraction of corn will be affected, if even that. Other products based on the protein and oil fractions will decrease in price, as they will be by-products of ethanol production, and will re-enter the food chain. Cheaper steaks, (at least as regards cattle feed---there is still the effect of the huge increase in the price of oil on processing and transport)yum!
The tree huggers who are so gung ho about ethanol aren't going to be very happy to see bunches of trees cut down to make more fields.
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