These days, everyone’s getting on the bandwagon for increased production of ethanol, from World Bank Pres. Paul Wolfowitz to US corn farmers.
Just last week, as US President George W. Bush toured Latin America, Wolfowitz said the US should lower or even remove its trade tariffs from Brazil, until recently the world leader in the production of ethanol.
“Barriers to the international trade in ethanol need to be examined,” said Wolfowitz at a conference in London on financing low-carbon energy. And he made no bones about saying the Bush administration should take part in that examination.
Not listening
Asked by one reporter whether his remark meant that the US should lower or remove its import tariff of 54¢/gal on ethanol from Brazil, the World Bank president-never known for mincing his words-snapped back: “That’s what I said. Weren’t you listening?”
But the Bush administration may not have been listening, even though it reportedly wants the US to increase the use of biofuels in order to reduce its dependence on imported oil. The problem?
Despite research from the Energy Information Administration showing that Bush’s target of reducing US consumption of gasoline by 20% in 10 years cannot be met from US farms alone, the US president has refused to countenance tariff changes that might be unpopular with his country’s farmers.
And the Wolfowitz proposal might indeed upset those farmers quite a lot.
Unlike Brazilian ethanol, which is made from sugar cane, US ethanol comes from grain, mostly corn. Indeed, thanks to booming ethanol production, corn prices have risen to 10-year highs and turned around the financial fortunes of many US corn farmers.
That’s based on current usage. But farmers are also looking to projections that suggest their corn may become even more lucrative.
Sweet projections
The US is phasing in a federal mandate for sale of 7.5 billion gal/year of renewable vehicle fuel by 2012. Most such fuel now is ethanol blended with gasoline to a concentration up to 10%. Bush wants to raise the mandate for renewable and alternative fuel to 35 billion gal/year by 2017.
Automotive engineers say they eventually will be able to build car engines superior to gasoline engines thanks to ethanol’s high octane.
For farmers, the results are predictable.
The US Department of Agriculture forecasts that the US, already the world’s largest producer of corn, will boost land dedicated to the crop by 8.7 million acres in the year to Aug. 31, 2008, to 87 million acres. Some expect land committed to corn to rise to as high as 90 million acres.
That may mean a lot of sugar in the bank for US corn farmers, but some other US businesses have complaints. As crop prices soar due to the increased demand for ethanol, US soft-drink makers say they soon may not be able to afford sweeteners made from corn.