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Governors call on USDA to Refine 'Ethanol for Fuel'
Statistics
From farm to retail, prices for all agricultural goods
have been going higher over the past year and it's no
secret that prices throughout the entire food chain are
rising. Retail beef prices rose 3% last year and have
risen 10% since 2006 and a key culprit is the continuing
rise in the cost of commodities and feed such as corn.
When it comes to the price of corn the industry has seen
the near tripling of prices since 2006. Press reports
cite a variety of reasons for such price increases
including harsh weather and rising demand across the
globe. But many reports place some blame on the US
Government's ethanol subsidy program which encourages
farmers to sell corn into the ethanol market. A key
reason why press reports include ethanol as a reason for
rising corn prices can be attributed to a monthly report
from the USDA entitled World Agricultural Supply and
Demand Estimates.
In this latest report the USDA estimates that the
biofuels industry will funnel 4.95 billion bushels of
corn into ethanol in the current year which is 40% of
last year’s crop. Now more than 30 state governors are
crying foul. In a letter sent to USDA chief Tom Vilsack,
the governors claim that when the headline is that 40%
of the nation's corn supply is diverted to ethanol that
the public is severely mislead.
The public is under the impression that corn that should
be sold as animal feed is instead being sold into the
ethanol market. The resulting affect being that feed
prices are increasing which in turn affects prices
throughout the food chain. This, the governors write
simply does not tell the whole story. Their basic
argument is that one-third of the grain used in ethanol
production returns to the livestock feeding stream as
distillers grains, a high-nutrient livestock feed. So in
fact the corn which is sold into the ethanol market
actually serves a dual purpose.
After corn is distilled as part of the ethanol
production process distillers dried grain (sometimes
called DDG the byproduct produced) makes it to market as
animal feed. It is not an either/or proposition where
corn supplies either go to feed animals or to produce
ethanol instead the way that the system works is that
these corn supplies actually serve the needs of both
markets.
Kansas Corn Growers Association President Bob Timmons
has argued for the USDA report to be clarified and
include a more accurate reporting method that would give
a precise picture of corn use in ethanol. "Right now,
people look at the USDA reports and see the number of
bushels going into ethanol, but they don't see that the
plants only use the starch and return a third of the
grain as livestock feed in the form of DDG," Timmons
said. "This leads people to exaggerate how much corn is
used to make ethanol. Grain production, ethanol
production and livestock production aren't competing
interests-they are complementary." The governor's letter
to the USDA claims that the current reporting process
leads to "sensationalized reporting" and also asks for
changes.
Not everyone believes that the USDA report is inaccurate
or unfair. Many ranchers and beef producers claim that
while DDG can be used as livestock feed it is considered
a second-rate substitute and they would prefer to
purchase the corn itself. For its part the USDA says
that it is considering whether to clarify the language
in its reports to include the words “and co-products” to
its monthly “corn use for ethanol” estimate.Published:
April 2011 |
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