Sir, I don’t know you from Adam. If anything, it was a practice in being polite.
I said nothing about keeping all the subsidies. My major concern is about the tariff. We always knew VEETC would go away eventually. The blenders credit was already reduced in prior years, so it was a matter of time. In fact in a paper from the University of Minnesota almost a decade ago, also opined that all those credits would go away.
My speaking towards efficiency was in response to your comment about ethanol being energy negative. Let’s not mix up arguments.
The title of the thread was End of the Ethanol Subsidy, not end of tariff protecting corn growers.
The connection between a subsidy and efficiency is obvious. If the production of ethanol is efficient enough to produce more BTU’s than it uses to produce it (including producing the raw ingredient, corn) fine and good. Then why does it need a subsidy, which all taxpayers pay, so that ADM, etc. can make a larger profit?
No one suggested you needed a psych eval. If you do not understand the connection between sarcasm and passive aggressive behavior, check it out.
That was part and parcel of the legislation considered by the Senate and offered by Senator Feinstein (amendment SA 476 of S. 782…“Ethanol Subsidy and Tariff Repeal Act’”). Thus it is part of this conversation.
To be proper, ADM is a small player any more in the Industry by volume and sales. Why not say Valero, or Cargill, or Poet? Because in all this, ADM has been the easy target of all that is bad about the Industry.
The source of the subsidy, and all following it began during the Gas Crisis of 1979. It’s use grew, along with State supports after 1999 to spur increased production on the eve of the elimination of MTBE. Again I say, if the subsidy goes away, which we all feel it will, it will not be a surprise, and life will go on in the Industry. It will become a sharper balancing act for producers to be sure, but proper risk management (unlike VeraSun) will win the day. Of course further innovations in the process, feedstock development, and additional co-products will offset losses of the subsidies.
All that however will be for naught because of the removal of the Tariff. And as I said before, it is an improper action because it shifts jobs overseas, and will further diminishes economies in rural areas of the U.S. And all those billions of pri
Most if not all rail cars used by the Ethanol industry are leased. The only exception I have seen is BNSF, which has a fleet of tanks under their own marks. Major players are Trinity and Union Tank. The cars themselves are not leased by the plant, but Marketing groups who sell the product. We are talking about over 18,000 rail cars (I have no idea what the BNSF fleet looks like).
The tanks can be used in other services after being cleaned. Still the market for them would be overbuilt. First to go would be the older privates being used. The DDG cars on the other hand, at 6300 cubic feet would be hard to pawn off to other industries. Those cars cube out before coming to max weight in DDG service. There is a number of 5700 cubic foot ACFX cars that were converted for DDG from plastics, but I doubt because of their age they would be of any good in the market. Same goes for those (insert explicative here) AEX cars.
So let’s see, 18,000 cars at a conservative figure of $60,000 per, is about $1.08 billion. Huge investment!
The impact to carriers will be large, but there is no one who can tell you exactly how much, since rates for ethanol are very very competitive, meaning they are on a need-to-know basis. You could not even estimate it. Can it be offset by increased grain shipping as a result? I can only make speculations, of which I am not willing to post here. That will be a subject however in many board rooms of carriers in the U.S. Carriers have however proved they have the capacity in place either way.
Band leader: Thanks for the informative discussion.
Feinstein’s coupling of ending the subsidy with ending the protective tariff probably makes ending the subsidy a dead issue in Congress, at least for now.
You said, “the production of Ethanol is a minute cause of current commodity prices.” But how can that be when corn for ethanol conversion represents almost 40% of US corn production? Lest you think I am speaking from a solely lefty/green/whatever perspective, see what the Wall Street Journal (pretty conservative) says:
[from WSJ online 1/22/2011:
"The nearby chart, [it wouldn’t copy] based on data from the Department of Agriculture, shows the remarkable trend over a decade. In 2001, only 7% of U.S. corn went for ethanol, or about 707 million bushels. By 2010, the ethanol share was 39.4%, or nearly five billion bushels out of total U.S. production of 12.45 billion bushels. Four of every 10 rows of corn now go to produce fuel for American cars or trucks, not food or feed.
This trend is the deliberate result of policies designed to subsidize ethanol. Note the surge in the middle of the last decade when Congress began to legislate renewable fuel mandates and many states banned MTBE, which had competed with ethanol but ran afoul of the green and corn lobbies.
Best practices in farming points to rotation of crops. Up in my area, mostly beans or corn. Some have gone with Corn on Corn acres in the past few years, but that proposition can be expensive, and there is a potential for damage to the land if done for an extended period of time. The largest single reason to rotate crops is the yields. And yields do suffer under Corn on Corn acres.
Given that in Iowa, production has risen 20 percent while using 37 percent less land over the last 10 years, the key is always yields. What I hear from every farmer in the Autumn is the boast of what yields they got. It becomes a badge of honor so to speak when they hit 200 bushels per acre for corn, or 64 bushels per acre of beans. To gamble on less yields by going Corn on Corn is a weighty decision a farmer must make. But heck, all farming is a gamble. Always has been.
So no monoculture here for the most part, you just plant your crops and takes your chances.
I have no doubt the folks at the WSJ have done their homework. But that does not account for the fact that at least in Iowa:
“In the year 2000, there were 2.4 billion metric tons of grain available for uses other than for ethanol. Even with the growth of the ethanol industry, last year there were 2.6 billion metric tons of grain available for uses other than for ethanol. ” ? So while feedstocks increased for ethanol usage, there was still ample supply in the market to cover other uses. It also ignores the billions of tons of DDG (byproduct of ethanol production) that livestock producers purchase as a substitute for whole grains. In reality, it reduces the feed cost per animal, and demand for whole grains.
Pilgrim’s Pride failed due to poor risk management, not overall costs of feedstock. This caused a huge ripple effect here, leaving one provider having to curtail expansion.
[quote user=“schlimm”]
3. “ADM is a small player?”
Ownership Of The Ethanol Industry (Jan. 2007)
Taken together, farmer- and locally-owned ethanol plants make up 40 percent of the ethanol industry.
Archer Daniels Midland (ADM) controls about 25 percent of U.S. ethanol production.
Other companies (such as VeraSun, Aventine, Cargill, U.S. BioEnergy, etc.) comprise 35 per
There are much more efficient ways to produce ethanol than from the kernels from a corn plant. There is an exhaustive article in an issue of National Geographic around September or October of I think 2007. On the cover it says “Growing Fuel”. Sugar cane ethanol has an 8 to 1 return as compared to corn kernels which at best are 1 to 1 if not easily .8 to 1 or .7 to 1. Hawaii and southern states are great areas to grow sugar cane. Ethanol fuels can be made from sugar beets and many other plants. Forgive me if I repeated what someone else already said, I didn’t have time to read all of the replies to this thread.
51¢ per gallon federal blenders credit for $2.5 billion = your tax dollars.
Now 40¢ per gallon.
$0.9 billion in corn subsidies for ethanol corn = your tax dollars.
Let’s look at those corn subsidies. Indeed one of the most complex programs our Federal Government has ever proposed. LDP, Direct Payments, Counter Cyclical Payments, Market Loss Assistance , Crop Insurance Premiums Subsidy, Advance Deficiency, the list goes on. This is why most producers have accountants to help them understand it.
That program is broken from the word go in many respects. Year after year, an Iowa Senator and others have tried to cap income as a threshold to payments, with no avail. Most payments to farmers are the top 10% of them receiving about 80% of the total(IowaStateUniversity).
$3.6 billion extra paid at the pump.
I could not find one bit of evidence this is happening. Given these figures from Mid-May by OPIS. Spot E-10 prices were reported in Chicago at $2.67, 56¢ cheaper than spot gasoline. In New York Harbor, ethanol spots were at $2.74, 55.6¢ cheaper than spot gasoline. Now remember, the consumer does not get the blenders credit, only the suppliers. ETOH was $2.50 in Chicago while Unleaded at the rack was $3.20. So one gallon of E-10 had 25¢ worth of ethanol to $2.88 worth of Gasoline, or a total price of $3.13, 7¢ cheaper than Unleaded.&
So what does this mean in the big picture? Will the subsidy be removed, or is this simply a proposal that will be fought over, leaving the result unknowable at this time? Do those in favor of removing the subsidy also intend that the ethanol mandates be rolled back or prevented from expanding futher?
Is it possible that the subsidy will be removed, but the mandates will persist and expand with ethanol provided by foreign production?
I know some people want to use ethanol, and some people want the government to force everybody to use ethanol. The motivation for these reasons to use ethanol seems to be mostly for saving the planet. As a practical matter, ethanol has less B.T.U.s that gasoline or diesel, and it is the subject of great controversy regarding its effect on engine life.
In Minnesota a couple years ago, the lawmakers wanted to force the railroads in the state to use ethanol in their diesel fuel. It is my understanding that there was enormous resistance on the part of the railroads because of the uncertainty of the mechanical effect on their diesel engine investment.
The ethonal is still a required fuel additive, that hasn’t changed. But it has real practical problems that make it undesirable. Mostly that in high percentages it will rapidly deteriorate seals and tubes on even the most modern cars. The subsidies also ate into food supplies causing food prices to rise. There is still demand for corn products so hopefully traffic should remain the same. We shall see
I will deal with the Duke study now, the other later. First off, CO-2 is captured at a majority of production plants. It is sold to who ever wants it. Next up, not every farmer in every region is pulling CRP land into production. Some of it is naturally not able to produce.
Do these researchers ever go out of their offices and see the reality of what they speak to? I was born and raised in Chicago, I did not learn about farming and rural life til I moved to this area. And I still have a lot to learn, but I go to the source, either producers or the Extention Office. Not some silly website who’s information I cannot verify.
“Silly website.” Undoubtedly you know a lot about farming, but I think most people would agree that a researcher at the College of Agriculture at UIUC, which brought the US so many advances to farming over its long history, is not to be dismissed so cavalierly as silly, especially one in ag. econ…