Dallas Morning News, TX
01-30-07
Biofuels turning economy on ear
Thanks to high oil prices and energy security concerns, biofuels have been
upsetting the economic order around the world.
Demand for corn-based ethanol in the United States is blamed for a sharp
increase in tortilla prices that has millions of Mexico's poor spending three times
as much as they did a year ago for a dietary staple.
Ethanol made from corn or even plant fibers could preserve Texas farmlands.
World trade rules have outlawed federal cotton subsidies and, thanks to a
complaint filed by Canada and Brazil, may do the same to payments for corn.
Biofuel advocates say cotton growers could turn to switch grass as a feedstock
for what's called cellulosic ethanol.
Corn farmers, meanwhile, are less dependent on subsidies as prices rise. Corn
subsidies are expected to fall to an estimated $2.1 billion in 2007 from more than
$8 billion a year.
Peru's governments have tried for years to turn farmers away from coca plants
grown for cocaine. Sugar cane turned into ethanol and exported to the United
States may now provide an economic alternative.
Dallas-based (and privately owned) Maple Cos. has launched a $120 million
venture in Peru to grow 25,000 acres of sugar cane, distill it into ethanol and ship
it to U.S. markets.
If Congress approves a free-trade agreement with Peru negotiated last year,
Peru's ethanol would come into the country tariff-free.
Brazil, the world leader in ethanol production, has freed itself from oil imports and
has announced investments to double ethanol capacity as it nears agreement
with Japan to blend Brazilian ethanol into Japanese gasoline.
The rush to biofuels is all about fuel economics and politics. With crude oil
soaring to nearly $78 a barrel last year, the price of alternatives to gasoline
soared as well. And with energy forecasts pointing to increased reliance on oil
from the highly volatile Middle East, governments are squirting starter capital into
the biofuels' carburetor.
The federal incentive for ethanol is a tax break of 51 cents a gallon. Last year,
more than 5.3 billion gallons were produced. An additional 600 million gallons
were imported, most of it from Brazil.
President Bush is urging Congress and the nation's biofuels industry to
accelerate the use of ethanol to curb gasoline consumption by 20 percent by
2017.
Ethanol already consumes one-fifth of the nation's corn crop, and that's caused
hardly a dent – less than one day's worth of oil imports.
A big difference won't come about until refiners start turning corn stalks, wheat
straw, wood chips and grasses into ethanol, which is really nothing more than
grain alcohol.
"Turning corn into alcohol's not much for technology. Bootleggers have been
making corn whisky since the country was founded," said Joe Bouton, a senior
vice president with the agriculture-focused Samuel Roberts Noble Foundation in
Ardmore, Okla.
"You can't get to the president's targets with just corn," Dr. Bouton said. "That's
why you want to use a cellulosic process, to distill the more complex sugars in
stems, corn stover, wheat straw, really any kind of plant product."
Iogen Corp., a private company based in Ottawa, Canada, has a cellulosic
ethanol demonstration facility, and is planning a commercial plant in Idaho.
Despite all of these economic movements, biofuels won't stay hot if oil prices
continue to fall.
Iowa State University researchers have charted the economics of ethanol
against corn and oil prices. In July, when oil was at $78 a barrel, you could have
made money in ethanol even without the federal tax break.
Today, you'll be under water, with or without that federal help. Crude oil is down
to $54 a barrel.
The Iowa State numbers show ethanol producers need corn cheaper than $3.70
a bushel, even with the tax break, to make money at those oil prices.
The March price for corn on the Chicago Mercantile Exchange was $4 a bushel
Monday.
Dr. Bouton's not worried.
"Barnyard economics – we send overseas $350 billion a year to pay for oil," he
said, "so why not capture some of that in the rural economy?"