Debate heats up over ethanol’s impact on rising feed costs
An agriculture divided is emerging as ethanol proponents and feed industry leaders
stake out positions on the impact of diverting corn for ethanol.
Corn and soybean prices
will stay at
high levels for years to
come, thanks to con-
tinued demand from
the rapidly growing
ethanol industry. That
was the gloomy mes-
sage from USDA chief
economist Joseph Glauber as he testified be-
fore the U.S. Congress Joint Economic Com-
mittee in early May. Glauber told members to
expect ethanol’s demand for corn to continue
to depress livestock production and increase
consumer prices in the years ahead.
But some are—not surprisingly—calling
such statements misinformed. Jon Doggett,
vice president of public policy at the National
Corn Growers Association, says population
growth and oil prices—not diversion of corn for
ethanol—are behind the woes of rising food and
feed prices. In a report by the Red River Farm
Network, Doggett said, “There are plants online
now commercially producing grits for snacks,
corn oil for human consumption, and feed for
livestock and ethanol. We have food, feed and
fuel. It is not an either/or situation.”
But the word from others would lead you
to believe that’s exactly what it is. When Tyson
president and chief executive Dick Bond made
the case for most ethanol subsidies to be given
the axe, the food versus feed versus fuel debate
$5 million in its fiscal second quarter, and
a month later warned higher input prices
would add $1 billion to input costs this year,
with $600 million coming from higher corn
and soybean meal prices.
But, like the corn growers association, other
companies have questioned whether blaming
the ethanol industry is at least a bit off-target.
Ethanol-producing Archer Daniels Midland Co.
has historically gone on record saying that tech-
nologies developed through the ethanol boom
would improve crop efficiency and defuse the
food versus fuel concern.
But some believe ADM’s interest in growing
its corn-based ethanol business may be stating
to wane. Suddenly it’s a whole lot easier not
to make money in ethanol. But experts say
that companies like ADM—with a foot in both
feed and fuel--are large enough and diverse
enough to ride out the volatile corn-based
ethanol market.
Bond has been quoted saying that diverting
corn to make ethanol doesn’t make sense and
he warned that upward pressure on food prices
will get much worse. A week before Bond’s
statements, Texas Governor Rick Perry called
for a federally mandated ethanol production
target to be slashed in half in that state due to
concerns over food prices, a move backed by
Bond. Texas is the first state to try to opt-out. In
addition to Tyson’s backing, the Texas governor
garnered the support of poultry giant Pilgrim’s
Pride Corporation.
the industry is actually helping to keep oil prices
lower than they might otherwise be.
Alternatives to grain
Some in the feed business appear to be
taking matters into their own hands and are
forging ahead with plans for developing biofuels
from non-food sources.
Alltech recently announced it has received
a grant of up to $30 million from the U.S.
Department of Energy (DOE) to be used
towards the establishment of its rural com-
munity biorefinery. The plant will be one of
the first in the U.S. to utilize cellulose, such as
switch grass, corn cobs and corn stover, at raw
material levels of up to 30 percent. The fiber
will be converted to ethanol and other value-
added products. The facility will also have the
capability to produce algae, a plant that can
theoretically produce 5,000 gallons of biofuel
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Some in the feed business appear to be taking matters
into their own hands and are forging ahead with plans
for developing biofuels from non-food sources.
flamed higher. Bond’s statement, reported by
several mainstream financial media, came
at the end of April and challenged the U.S.
Congress to reduce or drop a federal tax
subsidy and end import tariffs on sugar-
based ethanol. Tyson reported a net loss of
Meanwhile, the folks at the Renewable Fuels
Association (RFA), the U.S. ethanol industry’s
lobbying voice, describe the allegations as just
plain ‘wrong.’ RFA President Bob Dineen has
said not only is ethanol not to blame for con-
tributing significantly to rising food prices, but
per acre per year, whereas corn can produce
400 gallons per acre.
A few weeks after Alltech’s announce-
ment, Genencor, a division of Danisco A/S,
and DuPont announced an agreement to
form DuPont Danisco Cellulosic Ethanol LLC,
a 50/50 global joint venture to develop and
commercialize the leading, low-cost technology
solution for the production of cellulosic ethanol.
The partners plan a three-year investment of
$140 million, which will initially target corn stover
and sugar cane bagasse. Future targets include
multiple ligno-cellulosic feedstocks including
wheat straw, a variety of energy crops and
other biomass sources.
The search for renewable fuels is bound to
accelerate. How long the U.S. can afford to
rely heavily on grain to fuel its future is question-
