Corn in the crosshairs
Over the last 18 months there has been more media attention devoted to the corn and ethanol industries than at any other point in time. Unfortunately much of the coverage has been negative and one-sided. As with any issue it is good to be as educated as possible, to get the facts and to look at the issue from various perspectives - and then use good old Nebraska common sense to determine your position.
Today, local issues tend to be heavily influenced by global developments, federal policy, and social, economic and political trends. The corn-to-ethanol process - and your point of view - while local to the core, are impacted by what’s happening in the Middle East and by policy makers in Washington, D.C. Corn-to-ethanol is also intertwined with such issues as global warming, world hunger and human health. Who would have thought that this crop grown on Nebraska farms for more than 100 years would now have such far-reaching implications?
Traditionally, our corn has been used to feed livestock here and around the world, and to process into various food products. In my parents’ and grandparents’ generations, nothing was wasted on the farm. Every part of the crop was used. The kernel itself was the primary product, but corncobs became a fuel source and the shucks were even used for mattress padding. Production capacity was limited by the quality of the seed, the lack of mechanization, and the fact we used many of our productive acres to produce crops that served as a fuel source - not for engines, but for horses that provided the power to pull equipment.
For decades farmers have suffered through difficult times due to weather, insects, overproduction and uncertainty of government programs. Those government programs were designed to provide this country with an abundance of crops, in order to maintain a cheap food supply and to keep farmers on the farm doing what they do best.
The challenge from a farm perspective has been this: How do we expand the demand for our commodities and create new markets with the hope of finding higher values for what we produce? How can we create new opportunities for future generations that want to have a career in agriculture - a career that allows them to adapt to new technologies and lifestyle conveniences to which urban families have access? As we develop new uses and add value to these commodities in our state, can we add jobs and tax revenue that can revitalize rural communities that have struggled to survive?
If you want to find a group to blame or credit for developing the corn-to-ethanol industry, you first have to point to the 30-year efforts of corn farmers. Their perseverance has been amazing. It has taken years to develop the industry from a technical standpoint, including millions of dollars in
public research; Public education and information sharing financed with resources that have come from corn farmers’ pockets; and a lobbying effort that had to confront the resources that big oil companies brought to the table. These efforts were rewarded just before the end of 2007, when Congress passed the Energy Independence and Security Act. This legislation now propels the corn industry into a solid renewable resource venue, supplying this country with 15 billion gallons of corn-based ethanol by the year 2015.
What do you need to know about the corn farmers’ perspective on this topic and what are some of the important facts to know before you form your own opinion?
First, farmers in general want to derive the value of what they produce from the marketplace. Second, American agriculture provides this country with the cheapest, most abundant and safest food supply in the world. Third, corn farmers can supply enough corn for feed, food and fuel for the foreseeable future given the incentive of profit and opportunity.
For the last 18 months we have seen better sustained value in commodity prices than we have ever seen before. Periodically over the decades, commodity prices have increased with a weather scare or a sharp increase in demand from a specific foreign country - but then they quickly would fade, and the government would have to step in with support to keep our agriculture industry in the black.
Now, as our world deals with a growing demand for protein and energy, renewable crops like corn have become a target and a solution - depending on your point of view. Our dependence on foreign oil and the cost of that oil has hit new records. Recent $100-a-barrel oil prices and a protracted battle in the Middle East provide a backdrop of concern for U.S. citizens as to where their energy is going to come from. Things like eliminating MTBE (a petroleum product) as an oxygenate in our fuel due to its health concerns sent the demand for ethanol skyrocketing a couple of years ago. Hurricane Katrina slowed our oil-refining capacity, and the passage of legislation stimulating ethanol production and usage has put the ethanol industry in the spotlight.
In August of 2006 corn prices started an unprecedented increase of value just as the fall harvest moved into full swing. Ethanol plants were springing up all over the countryside and the oil industry realized that ethanol was for real. Users of corn for once realized that the demand and value of this commodity was going to have ripple impacts on their industries - the world had been used to cheap, abundant corn for too long.
Corn and the new value-added renewable fuel (ethanol) together became the target of every conceivable negative headline out there. It was time for the corn industry to defend itself, which brings us to why I find it important to share a few points from a Nebraska agricultural perspective.
This country has long been too dependent on oil, and now we have created an attitude that says renewable crops can play a role in helping us find new energy sources. It also helps us stimulate the idea of wind, solar and thermal energy sources.
Nebraska is now home to 23 ethanol plants producing 1.3 billion gallons of ethanol from nearly 500 million bushels of our 1.4 billion bushel annual corn crop, while at the same time producing 4.6 million tons of distillers grains (a coproduct) that has great cattle feeding properties. A 100-million-gallon ethanol plant (average size) is typically a $140 million investment that will employ 50 full-time employees with an average salary of $50,000 and support nearly 140 other related jobs. It will pay over $4 million annually in taxes and have a total product output each year of over $245 million dollars.
Much concern has been expressed over water usage by corn and ethanol. This needs to be clarified. More than 86 percent of the U.S. corn production is rain-fed, not irrigated. The average ethanol plant uses a little more than three gallons of water to produce a gallon of ethanol. Much of that water is recycled, or used back on the land around the plant. Some of it goes out in the distillers grains. In comparison, to produce an average-sized Sunday newspaper requires 150 gallons of water; a golf course uses 685,000 gallons of water annually to irrigate one acre; the city of Omaha uses nearly 100 million gallons of water per day; and, it takes 1,851 gallons of water to refine one barrel of oil.
As the opposition to the corn-to-ethanol industry developed adversarial media attacks, there were two in particular that caught my attention and deserve a response. One is that corn causes obesity, because high fructose corn syrup (derived from corn) is in everything we eat. The other was that by using corn to produce ethanol, we are causing world starvation. It is hard to grasp these two arguments in the same paragraph. However, the idea of corn causing obesity is ludicrous. A lack of exercise and overeating, with some genetic disposition to being overweight, ranks first. The starvation issue in third world countries begs this question: Why were those same countries experiencing starvation when we had a four billion bushel corn surplus and corn prices at less than $2 a bushel? Starvation around the world, while sad and unacceptable, is not the fault of the American corn farmer.
One of the primary arguments as to why we should not develop the corn-to-ethanol industry is because it will raise food costs. This is one that deserves honest and thoughtful discussion. While the doubling of the value of corn will undoubtedly have some impact on food costs, researchers have agreed the cost of energy to process and transport food has twice the impact on the cost of food to the consumer. The value of corn in the typical box of corn flakes is less than five cents per box. I’ll let you come up with your own conclusion of where the cost and profit is in the food industry.
Some outdated research would lead you to believe it takes more energy to produce a gallon of corn-to-ethanol than you get out of it. Maybe that was true 25 years ago, but today’s technology allows a 30 percent and greater energy benefit.
Ethanol will not be the only solution to fix our annual consumption of 150 billion gallons of gas, but it is a start. It also sends a tremendous message that we can develop our own energy sources, and it can further stimulate our exploration and usage of other unique energy sources.
Many feel we should not mandate or subsidize our development of renewable energy, whatever form it is in, and that we should allow the free market to dictate. The only trouble with that is that the free market in energy is controlled by the petroleum industry, which is not always welcoming to others entering into its ballpark.
No state is better situated than Nebraska to take advantage of the “corn-to-ethanol-to-distillers-grains-to-cattle” scenario. We have the corn, we have the cattle, and we are now second in the nation in ethanol production. We have rejuvenated more than 20 communities with biorefineries. Our state’s economy is now showing a resurgence of income, much to the credit of agriculture.
We are facing some new challenges with this new era. First and foremost is keeping our livestock industry profitable and located in the state. We still rely on the livestock industry as the most important thing Nebraska agriculture has going for it. We need a better distribution system of getting more ethanol blended into our fuel supply, one that includes more pumps that will disperse various grades of blended ethanol in our fuel. We will need more research and technology on feeding other livestock the coproduct of the ethanol industry. We will continue to research new and better ways to grow corn and to refine ethanol to use less water and increase ethanol yield.
This is a tremendous time in agriculture with dynamic change - a time when, hopefully, a rising tide raises all ships. We have seen record wheat prices, 34-year highs in soybean prices, solid demand for dairy and pork exports and stable cattle prices. Agriculture cannot sit idle - we have to be fully engaged in the process of change and constantly developing our markets and opportunities. Corn-to-ethanol is a new opportunity that Nebraska corn producers, and all Nebraskans, should be proud of.
