Many Fear the Inevitable Bust of Ethanol
Farm and Food File for week of November 26, 2006
For years, farmers' hearts would leap when the word "ethanol" appeared in a newspaper headline. Now farmers almost dread it because they know the ensuing story is likely to outline the inevitable bust that awaits them if the current unplanned, willy-nilly ethanol boom continues.
Two weeks ago this space listed several scientific, economic and political facts about to take the shine off ethanol's apple. It was offered as a caution to hopped-up farmer-investors throwing buckets of money, either real cash or contracted cheap corn, at the many ethanol schemes now roaring down nearly every county blacktop.
Reaction to that column was stunning. Nine out of every 10 readers who contacted me by phone or email agreed that this beautiful new agricultural outlet was quickly heading for disaster because of rapid overbuilding, the lack of coordinated planning, and pie-in-the-sky economics.
Indeed, these private remarks were, and are, the direct opposite of public remarks made by ethanol enthusiasts. Most invoke ethanol as the future of American agriculture. All claim America can replicate Brazil's near fuel self-sufficiency with ethanol. And nearly everyone promises an endless era of happy biofuel days ahead.
More and more farmers, however, are more and more skeptical. All wish (as do I) ethanol future success. All know, however, that today's gold rush is foolishly unreal. And we know because we can read.
For example, according to a Nov. 19 Des Moines Register story, Iowa now has 25 operational ethanol plants, another 11 under construction, and "a couple of dozen on the drawing boards."
"If all are built," noted the Register's Phil Brasher citing estimates developed by Iowa State University ag economist Bob Wisner, "Iowa farmers would have to plant an additional 8 million acres of corn--nearly two-thirds more than they harvested this year--to make ethanol and still feed the millions of hogs, chickens and turkeys produced here."
If the 8-million-acres-more figure rings a bell, recall that in testimony to the Senate Ag Committee earlier this year USDA Chief Economist Keith Collins projected the U.S., by 2010, would need 10 million more acres of corn nationwide to fuel the oncoming ethanol industry.
Now, however, a more detailed, local examination suggests that figure far off the mark. Indeed, the Hawkeye State alone--forget the other 20 states with plants either producing, under construction, planned or all three--needs 8 million acres more just to make ends meet if all its ethanol plans are carried out.
Far off the mark, also, is invoking Brazil in every ethanol discussion, says Tad Patzek, the UC-Berkeley engineer highlighted here two weeks ago.
"It's a perfectly rotten analogy," he explains, "because most Brazilians are too poor to own cars. As such, there are millions and millions fewer miles driven in Brazil. The comparison would only be valid if all Americans drove their cars only one day every other week."
No one explains the Brazil-U.S ethanol analogy this way because no one offering it has examined the facts.
Other facts seem to be unexamined or overlooked.
For example, how will U.S. farmers and their commercial counterparts store the billions more bushels of corn needed for ethanol when we cannot now store an 11 billion bu. crop?
Also, how will these huge amounts of grain move in--and by-products move out--of the ethanol facilities when our current rail and trucking sectors can't move today's lesser amounts?
And what will the transportation cost? American farmers pay twice commercial freight rates already; will those fees go even higher?
And too, if the vast majority of future corn production flows into domestic biofuel production should taxpayers now spend billions for scheduled Mississippi and Illinois River lock improvements even though American grain exports are likely to tumble?
These aren't esoteric or angry questions; they are questions nearly every farmer asks as he views today's corn Klondike. They neither want nor need a gold rush. What they need are answers so ethanol can become sustainable as it remains profitable.
But today's grab-it-while-you-can approach is going to cost billions when it busts. Just ask any farmer.
Lynn Illeck University of Michigan Dept. of Human Genetics Ann Arbor, MI 734-764-5492
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