The Atlanta Journal-Constitution
07-02-07
Chad Hart frets over corn.
By DAN CHAPMAN
"We ask a lot of the corn plant," said the Iowa State University economist.
Take the all-American July Fourth barbecue. Corn on the cob. Corn-fed cows
turned into hamburgers. Corn fructose in Cokes and cookies. And, increasingly,
corn ethanol blended with gasoline to power the fire engine down Main Street.
Corn is the country's main renewable-fuel source. President Bush has called for
35 billion gallons of alternative fuel annually by 2017. The Senate, in the energy
bill passed in June, set a 36 billion-gallon benchmark by 2022.
But corn — the every grain for every purpose — can't fill the nation's insatiable
appetite for food, feed and fuel.
"There's only so much corn you can grow in this country," said U.S. Sen. Saxby
Chambliss (R-Ga.). "We've simply got to move away from [corn] and have some
alternative products, and cellulose is one of the most promising resources."
Chambliss, ranking minority member on the Senate Agriculture Committee, has
introduced legislation to boost fuel derived from pine trees and other "cellulosic"
sources. Georgia, lo and behold, is home to 24 million forested acres.
Tuesday, the U.S. Department of Energy announced $125 million in grants to
boost cellulosic research. The University of Georgia received $20 million of that
amount. Georgia Tech got $5 million.
Politicians, scientists and investors are rushing to embrace the latest energy
panacea, just as they did corn until recently. Questions, though, abound.
"Can we make it commercially viable?" asked Hart, an agriculture economist.
"Is it cost-effective for energy producers and consumers to create fuel from plant
material? That's the stage we're at. We've proven the technology to do cellulosic.
Now we're working on lowering the cost."
Even with a bushel of corn flirting with $4, corn ethanol remains the renewablefuel choice. And, with prices expected to fall, it's too early to drop dirt on corn's
coffin.
"Farmers across the country planted the most corn since World War II," said Matt
Hartwig, spokesman for the Renewable Fuels Association, a Washington trade
group. They'll produce "more than enough corn to satisfy the needs for food, feed
and fuel. All industries that utilize corn will be able to thrive. Corn ethanol is here
to stay."
More acreage
Last year, Georgia farmers planted 280,000 acres of corn. This year, they
planted 500,000 acres — a 179 percent increase, according to the U.S.
Department of Agriculture.
Early this year, at the peak of the ethanol frenzy, 111 primarily corn ethanol
plants were operating and 75 were planned, according to the Renewable Fuels
Association.
Today, the number of proposed factories remains stagnant. Jill Stuckey, who
runs the alternative-fuels program for the Georgia Environmental Facilities
Authority, says "corn ethanol inquiries have pretty much slowed down. We're
getting a lot more inquiries from cellulosic."
Tony Flagg is chief executive of First United Ethanol, which is building the
Southeast's biggest corn-to-energy plant in Camilla.
"The industry got a little bit of a shakeout when corn prices first went up last fall,"
he said. "Higher corn prices have given lenders a little bit of a pause. It might not
be bad to slow things down a little bit."
Georgia's meat farmers concur. Georgia, the nation's top broiler producer,
notched $2.73 billion in sales last year — by far the state's largest agricultural
moneymaker.
This year's profits aren't looking as robust, especially when a chicken's diet
consists of 65 percent to 70 percent corn. Competition from ethanol has helped
raise chicken feed costs 44.5 percent between October 2006 and April 2007,
according to the National Chicken Council.
"That cost is being passed along to consumers," said Richard Lobb, the Chicken
Council's spokesman.
The National Turkey Federation estimates feed costs have gone up nearly $600
million this year. Milk, eggs, beef, pork and Coca-Cola face price increases due
to the competition between corn for ethanol and corn for food.
In a May report, Iowa State University "very conservatively" estimated that
consumers will pay $47 more per person for food due to higher corn prices.
Nationally, that comes out to $14 billion in increased food prices.
In a June 8 letter to Sen. Majority Leader Harry Reid (D-Nev.), the Chicken
Council — along with Coke, Kellogg Co. and other food companies and producer
groups — wrote that "rising food prices, coupled with the rising energy prices we
are seeing throughout the country, pose a threat to the health of our national
economy."
Hartwig says it's "disingenuous" to blame corn's popularity for the price
increases, especially with prices for petroleum — used to grow, package and
ship foodstuffs — notching record highs.
Tax credits, tariffs
Washington, to its alternative-fuel critics, practically guarantees profits to corn
ethanol producers, distillers and distributors. In 1978, ethanol blenders were
guaranteed a 51-cents-per-gallon tax credit. Two years later, a 54-cents-pergallon tariff was slapped on ethanol imports in an effort to boost domestic
production.
In 2005, Congress passed, and Bush signed, the Energy Policy Act that
established the Renewable Fuel Standard and mandated that minimum levels of
alternative fuel — again, mainly corn ethanol — enter the nation's automotivefuel stream. By 2012, 7.5 billion gallons a year were expected.
Production, though, will soon zip past that barometer. In this year's State of the
Union, Bush proposed the 35 billion-gallon threshold and asked Congress for
legislation to reduce gasoline consumption by 20 percent over the next decade.
Bush, though, didn't expect corn ethanol to fill the expected sevenfold increase in
alternative fuel. In February, the Department of Energy doled out $485 million to
six cellulosic ethanol plants, including a factory under construction in Soperton.
Another $23 million happened along a month later. Last week, DOE announced
$125 million each for three "bioenergy research centers," including the project in
Oak Ridge, Tenn., that UGA and Georgia Tech will join. The goal: to make
cellulosic ethanol — whether from pine trees, switch grass or corn stalks —
commercially feasible.
Chambliss' Cellulosic Ethanol Incentive Act requires regions around the country
to use a minimum amount of the renewable fuel depending on what's available.
In the South, that would be pine trees.
"Congress is still supporting corn, but they're dedicating more money to develop
these alternative fuel sources," said Hart. "It's basic research that needs to be
done — and it's a role Washington should play."
The poultry, beef and soda pop boys don't mind that Washington has turned its
renewable-fuel attentions away from corn ethanol. The Cattlemen's Association,
for example, has passed a resolution calling for repeal of the ethanol tariff and
the blender's tax credit.
Corn prices, though, are going down — good news for feed-users and foodeaters. Researchers at Morgan Stanley predict prices won't again breach $3.50 a
bushel for the foreseeable future.
"The livestock guys will continue to prosper, ethanol will continue to grow and
everyone will find room to operate," Hartwig predicted.