Nebraska Cattlemen, Farm Bureau on opposite ends of ethanol debate

A debate is raging within the state and nation's agriculture industry about the high costs of food and how much ethanol is contributing to it.

With Nebraska feedlot owners facing feed costs of as much as $300 per head, Nebraska Cattlemen is asking the U.S. Environmental Protection Agency to reduce the nation's renewable fuel standard (RFS) within the Clean Air Act to 4.5 billion gallons.

On the other hand, Nebraska Farm Bureau is urging EPA to deny the recent request from the State of Texas for a waiver of the Renewable Fuels Standard (RFS).

According to Nebraska Farm Bureau President Keith Olsen, "it would be short-sighted by those of us in agriculture to abandon or undermine decades of work to develop and expand a biofuels industry that is not only critical for boosting long-term demand for grains but also important in moving the U.S. closer to the goal of energy independence."

Renewable fuels aren't responsible for the higher food costs this year of the typical Fourth of July barbecue, according to FoodPriceTruth.org, a Web site administered by the New Fuels Alliance, a group funded by the ethanol industry.

"Everyone loves a Fourth of July barbecue, but no one loves grocery store prices anymore," said Brooke Coleman or FoodPriceTruth.com.

"The biggest reason food prices are through the roof is because gas prices are through the roof," Coleman added. After all, the typical item at the grocery store traveled 1,500 miles just to get there. Anyone who has been to the gas pump lately knows that shipping something 1,500 miles is going to make that item cost more."

Nationwide, diesel fuel is up nearly $2 per gallon from a year ago.

According to FoodPriceTruth.org, these are the real reasons why this year's Fourth of July BBQ will cost more:

n Chicken -- The average chicken sold in the United States travels 1000 miles just to get to the market, because the vast majority comes from Maryland or Arkansas.

n Pork -- According to USDA, the price of pork chops, ribs and bacon increased by about 2 percent in 2008, but a leading economist at Purdue University attributes 75 percent of corn cost increases to oil prices.

n Beer -- Retail beer costs are virtually the same as 12 months ago, before Congress passed the biofuels bill.

n Potato salad -- In the last year, potato prices increased by almost 9 percent, despite a big 2007 harvest and ample stocks of potatoes in storage; and mayonnaise, like most other products made using vegetable oil, has increased in price as higher incomes overseas mean better diets and more vegetable oil consumption.

n Fruit salad: Apples (up 14 percent this year), bananas (up 26 percent this year) and orange juice from concentrate (up 32 percent since 2006) are all more expensive recently. Harvesting fresh fruit requires a great deal of hand labor, which has grown more scarce in recent years (the nation clamps down on illegal immigrants), and the cost of freight has shot up with the price of fuel.

n Plastic cutlery -- Polystyrene, the type of plastic in a pincifork is produced from crude oil, and the price of crude oil increased by 97.6 percent in the past year.

"On average, the retail price of food rose by 3 percent per year from 1980 to 2005," said David Morris, vice president of the Institute for Local Self-Reliance. "During the same period the price of corn and soybeans and wheat remained the same."

But according to Chris Hurt, Purdue University Extension agricultural economist, with prices the way they are, very few people can afford it, whether it be livestock producers or ethanol manufacturers.

"The ethanol industry is struggling to pay for corn that has reached the $7 a bushel level," Hurt said. "So the ethanol industry may also experience losses and might not be able to bid the price. That will depend on what oil prices, and therefore ethanol prices, are.

Hurt said that before planting season began and the floods came, farmers had already indicated they were cutting back on planting corn this year.

In March the U.S. Department of Agriculture projected farmers would plant 86 million acres of corn nationwide -- an 8 percent decrease from last year.

Hurt said following a wet early spring that delayed planting in some states and then this month's devastating floods, the USDA adjusted its harvest estimate to 76 million acres and production to 11.7 billion bushels.

Hurt estimated U.S. corn production could drop below 11 billion bushels this year. "That's not nearly enough corn to go around," he said.

He said the U.S. ethanol industry needs 4 billion bushels of corn this year -- or 1 billion bushels more than 2007 -- to meet anticipated production. Also, livestock producers used 6.15 billion bushels and foreign buyers 2.45 billion bushels of U.S. corn in 2007, and both could buy at least that much corn this year if it were available and more favorably priced, Hurt said.

Usage will have to come down, likely in the livestock and foreign sectors, Hurt said.

"The USDA has said that if the ethanol industry gets 1 billion more bushels of corn it means that the domestic livestock industry will have to cut back 16 percent in feeding corn," he said. "And then our foreign buyers will have to cut back 18 percent."

Hurt said adding to the supply shortage and, ultimately, higher corn prices is the ongoing devaluation of the U.S. dollar.

"Another important part in who is going to be able to pay the price for corn is the exchange rate of the dollar," Hurt said. "When their currencies are strong, the foreign sector's currency goes a long way in the United States.

"If we should see our dollar weaken more, the foreign buyer is going to be able to stay in and pay these prices. That says that the domestic livestock feeder might have to bear even more of the consequences."

With demand for corn growing with more ethanol plants coming on line, producers this year planted less corn than last year's record harvest and laid everything on the line hoping the weather dice didn't roll them snake eyes.

But Mother Nature didn't cooperate and decided tho drench the nation's Corn Belt. With millions of farm acres damaged by high water, the losses to Midwest farmers stand to reach into the hundreds of millions of dollars, Hurt said.

"This crop in particular for our farm producers is the most valuable crop they have ever raised," he said. "Not only is it a valuable crop, they have the most invested in this crop of any crop they have ever raised. So if they are losing that crop, it is going to be the biggest dollar loss that we have ever experienced on a per-acre basis.”