UNL ag economist touts future of ethanol

Despite much controversy about ethanol in the recent food vs. fuel debate, the corn-based alternative fuel won't vanish from America's energy consciousness anytime soon, said a University of Nebraska-Lincoln agricultural economist Tuesday in Grand Island.

And continued public concern about climate change will make ethanol -- whether it's made from corn, corn stover or switchgrass-- viable for years to come, said Richard Perrin, who spoke at a program sponsored by the Grand Island Area Chamber of Commerce's Ag Committee at College Park.

UNL ag economist Bruce Johnson also spoke on agricultural land prices at the Ag Forum.

"Concerns about the environment and climate change will open up new opportunities for new kinds of products and new kinds of enterprises for farmers and ethanol plants in Nebraska," Perrin said.

On Tuesday, results of a new Nebraska rural poll was released showing 53 percent of poll respondents agreed or strongly agreed that global climate change requires immediate action by the government, while 21 percent disagreed or strongly disagreed.

Perrin said there are a number of ways that agriculture can sequester carbon and there are a number of ways that agriculture can substitute renewable fuels for fossil-based fuels.

"There's currently a bit of an opportunity for earning money and reducing carbon emissions, but there's going to be a lot more opportunities in the future," he said.

Perrin said those carbon offset credits farmers earn from sequestering land will grow to as much as $20 to $30 per ton compared to the $2 or $3 farmers receive now in the future as climate change begins having more and more an impact on human society.

Recently, increased corn-based ethanol production has been under fire from critics in the livestock and grocery businesses for increased feed and food prices.

An attempt by the livestock and grocery industries to scale back the federally imposed ethanol mandate was rebuked by the Environmental Protection Agency earlier this month.

Perrin, in May, wrote a paper that ethanol's increasing demand for corn is responsible for about 1.2 percent of the increase in U.S. food prices during the last two years, In poorer parts of the world, however, ethanol's impact on food prices contributes to as much as 15 percent of rising prices.

His report found that ethanol was responsible for about 40 percent of the increase in grain prices, but those higher grain prices only contributed about 3 percent to the increase in U.S. food prices and that 40 percent of 3 percent comes to about 1.2 percent.

"The main driver for higher food prices is something other than ethanol," Perrin said.

Ethanol defenders point to soaring oil prices as the primary culprit for higher food prices.

Panic over widespread flooding in the nation's Corn Belt earlier in the growing season shot corn prices up to more than $7 per bushel.

But earlier this month the U.S. Department of Agriculture reported that the flood damage was not as extensive was once believed and farmers are estimated to harvest the nation's second largest corn crop this fall.

Tuesday's cash corn price at the Aurora Coop elevator was $5.56 per bushel.

"The reason why corn prices have come down is that people are a little bit more relaxed about the grain supply as it's stronger than what people anticipated it might be," Perrin said.

He said earlier this year there was an atmosphere of "hysteria" about the viability of grain supplies.

Before the spring flooding in the Corn Belt, the U.S. Department of Agriculture initially estimated that this year's corn crop was going to be lower than last year's record crop, but that figure was eventually revised upward.

"People underestimated the resilience of the agriculture system," Perrin said. "As we have seen in the past, and you're seeing it now, when you get a price increase, you get substantial increases in production."

And when compared to oil prices, Perrin said grain prices are a "lot more reasonable."

"When we had $150-a-barrel oil, ethanol plants could afford to pay higher prices for corn," he said.

Oil prices have now declined about $35 per barrel and corn prices have also declined.

"I think the market is easing back to what is more of a sustainable price over the next two or three years," Perrin said.

To illustrate his point that grain prices have little to do with food prices, Perrin said even as gas and grain prices have eased back from market highs earlier this year, food prices are still on the rise and he doesn't expect them to go down.

"Food prices are expected to continue to go up," he said.