Money, Agribusiness, and Politics
This web page was last modified June 1, 2008 at 8:49 PM.
This web page was last modified June 1, 2008 at 8:49 PM.
New study from the International Institute for Sustainable Development confirms the extremely costly nature of the current subidized biofuel industry.
(From the executive summary) Political support for subsidies to biofuels has been described as a perfect storm, combining the powerful interests of agriculture, the national security community, and a significant portion of the environmental community. Such extensive and deep support has surrounded liquid biofuels with an aura of inevitability. Yet there has never been a more urgent need to examine the claimed benefits from biofuel subsidies, and to compare them with the costs of meeting the same goals in other ways.More below ↓
…Green fuel is not just a humanitarian disaster; it is also an environmental disaster. Those who worry about the scale and intensity of today’s agriculture should consider what farming will look like when it is run by the oil industry.
November 22, 2004 – Feeding Cars, Not People by George Monbiot – The Guardian
April 28th, 2006 – New ADM chief seen as bridge to oil industry – Chicago Business News – Ms. Woertz’s hiring at ADM also could help thaw the traditionally hostile relationship between ethanol producers and the oil industry…
May 7th, 2006 – The Real Biofuel Cycles by Tad W. Patzek – – Tad Patzek, of the University of California – Berkeley, submits his response to the recent Berkeley ethanol energy balance paper, This paper analyzes energy efficiency of the industrial corn-ethanol cycle and brackets energy efficiency of the switchgrass-cellulosic ethanol cycle. In particular, it critically evaluates the publications by Farrell et al. (2006a; 2006b) and Shapouri, Wang, et al. (Wang, 2001; Shapouri et al., 2002; Shapouri et al., 2003; Shapouri and McAloon, 2004). It is demonstrated that in a net-energy analysis of the industrial corn-ethanol cycle (Farrell et al., 2006a; Farrell et al., 2006b) did not (i) define the system boundaries, (ii) conserve mass, and (iii) conserve energy.
January, 2005 – Thermodynamics of the Corn–Ethanol Biofuel Cycle by Tad W. Patzek – Tad Patzek, of the University of California – Berkeley, authors the definitive analysis of ethanol production. Patzek revisits oft–cited studies and blows them right out of the water. He is quite critical of the Holy Scripture of the pro–ethanol gang, the 2002 USDA study, "The Energy Balance of Corn Ethanol: An Update" by Shapouri, Duffield, and Wang. The purpose of this paper was to prove beyond any reasonable doubt that the industrial corn–ethanol cycle accelerates the irrevocable depletion of natural resources: fossil fuels, minerals, top soil, surface and subsurface water, and air, while creating wide–spread environmental damage throughout the continental United States. My arguments relied entirely on the First and Second Law of thermodynamics, and on the Law of Mass Conservation.
March 15th, 2006 – Ethanol from Cellulose Biomass Not Sustainable nor Environmentally Benign – Institute of Science in Society press release – Major technical and economic hurdles remain in getting ethanol from plant wastes, while burning ethanol produces carcinogens and increases ozone levels in the atmosphere.
July 2005 – Ethanol As Fuel: Energy, Carbon Dioxide Balances, and Ecological Footprint – Bioscience; July 2005, Vol. 55 Issue 7, p593 – This study looks at both the U.S. and Brazilian ethanol industries and concludes in part, The use of ethanol as a substitute for gasoline proved to be neither a sustainable nor an environmentally friendly option, considering ecological footprint values, and both net energy and CO2 offset considerations seemed relatively unimportant compared to the ecological footprint. As revealed by the ecological footprint approach, the direct and indirect environmental impacts of growing, harvesting, and converting biomass to ethanol far exceed any value in developing this alternative energy resource on a large scale.
Members of a legislative committee on alternative fuels defended their chairman and another committee member Tuesday after questions surfaced over whether the two face conflicts of interest in sponsoring an ethanol bill.
Meanwhile, one lawmaker, a longtime advocate of ethics reform, said the involvement of one of the sponsors raised a red flag.March 12th, 2007 – Ethanol bill poses conflicts by Raquel Rutledge – Milwaukee Journal Sentinel
The two lead sponsors of a bill in the Wisconsin Legislature promoting the use of ethanol and the purchase of cars that run on an 85% blend of the corn–based fuel have financial ties to the ethanol and automotive industries, records show.
Hahn said he's already received an 80% return on his ethanol investment. Hahn also recently invested $2,000 in a start-up biodiesel plant, he said. “Maybe I’ll have to convert that to my wife’s name,” he said.
The excellent Project Vote Smart web site has a section on Rep. Eugene Hahn
As first reported in 2003 and continuing with the 2004 Wisconsin "Statement of Financial Interest" forms, Assembly District 47 Representative Eugene Hahn owns somewhere between $5000 and $50,000 in United Wisconsin Grain Producers shares. Here is Representative Hahn’s statement current through year's end, 2004. (PDF file)
Here is the disclosure for 2003, the disclosure for 2002, and the disclosure for 2001. – For the years 2001-2003, Rep. Hahn lists Didion Milling as one of the businesses with which he’s done over $1000 in business during the year.
April 21st, 2006 – Portage Daily Register – A year after ethanol: It's a boon for investors …State Rep. Eugene Hahn, R-Cambria, said the value of investments in UWGP also has increased, according to a newsletter he received, and a $1,000 initial investment is worth around $1,700 today. "They are enjoying a great prosperous moment in history," said Hahn, who has been the main supporter of ethanol in Wisconsin since he won the 47th Assembly District seat in 1990.
Rep. Hahn fails to mention that a minimum initial investment of $10,000 was required to buy shares in UWGP. I have been unable to verify the share value increases claimed by Hahn.
A side note: according to a March 22nd, 2006 A.P. report, Rep. Hahn is mentioned in testimony during Rep. Scott Jensen’s misconduct trial. I win the primary, the next thing I know I got a couple people from the caucus up meeting with me and my people,'' Hahn said. "Locally, we don’t know how to run a campaign. They’ve been at it for years. They told us what to do next … I never gave it a thought if they went off the state payroll or were on the party payroll.
Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families. We provide timely, accurate information on best practices in state and local job subsidies, and on the many ties between smart growth and good jobs. Good Jobs First works with a very broad spectrum of organizations, providing research, training, communications and consulting assistance.
Of 130 state legislators in office in 2001 and disclosing their interests in 2002, in Wisconsin:
- 28.5% of lawmakers sat on a legislative committee with authority over a professional or business interest.
- 23.1% of lawmakers had financial ties to businesses or organizations that lobby state government.
- 20% of lawmakers received income from a government agency other than the state legislature.
(From the executive summary) The report estimates that by the end of this decade, assuming continuation of current policies, annual support for ethanol will be in the range of $6.3 billion and $8.7 billion a year. Subsidies to biodiesel are also increasing at a rapid rate of growth in output, albeit from a lower base, and could rise to between $1.7 billion and $2.3 billion within two or three years.
WASHINGTON —Ethanol is far from a cure–all for the nation’s energy problems. It’s not as environmentally friendly as some supporters claim and would supply only 12 percent of U.S. motoring fuel — even if every acre of corn were used. A number of researchers, the latest in a report Monday, are warning about exaggerated expectations that ethanol could dramatically change America’s dependence on foreign oil by shifting motorists away from gasoline.
Although blending ethanol with gasoline at low levels as an oxygenate can lower emissions of carbon monoxide (CO), volatile organic compounds (VOC), and particulate matter with an aerodynamic diameter of ≤ 10 μm (PM 10) upon combustion, total life–cycle emissions of five major air pollutants [CO, VOC, PM10, oxides of nitrogen (NO2)] are higher with the “E85” corn grain ethanol–gasoline blend than with gasoline per unit of energy released upon combustion (12).
Devoting all 2005 U.S. corn and soybean production to ethanol and diesel would have offset 12% and 6.0% of U.S. gasoline and diesel demand, respectively. However, because of the fossil energy required to produce ethanol and biodiesel, this change would provide a net energy gain equivalent to just 2.4% and 2.9% of U.S. gasoline and diesel consumption, respectively.Faint praise, indeed! And we’re subsidizing these turkeys?
Jun. 28—Ethanol plants need a lot of corn and a lot of water, and Minnesota has a lot of both. But even the land of lakes and cornfields has its limits. Suddenly, so many new ethanol plants are planned in Minnesota that a once–unthinkable debate has begun: Will there be enough corn to go around? Investors plan to quadruple the size of Minnesota’s ethanol industry within just a few years, according to permit data from the Minnesota Pollution Control Agency. If they do, they’d devour more than half of Minnesota’s 1.2 billion–bushel corn crop. And that could spawn a new world of scarcity, where food companies, livestock operators and grain exporters scramble for what’s left of a shrinking corn pile. The concern isn’t that Americans will suddenly go hungry, but that ethanol’s appetite will create shocks in the food system that nobody ever dreamed of. “I’m afraid that people, in their zeal to get on board, are maybe losing sight of the impacts,” said Bob Zelenka of the Minnesota Grain and Feed Association. “It concerns me that there aren’t more policy folks taking a serious look at the ramifications.” The ramifications run deep because corn powers so much of the state’s economy.
Maybe you have an ethanol plant in the next county over. Maybe you’ve considered being a farmer–investor in an ethanol cooperative. Maybe there will be an ethanol plant in nearly every township, so your corn can be conveyed, instead of hauled. Yes, that may be a silly idea, but with the weekly announcement of a new Midwestern ethanol plant and the monthly announcements of plant expansions, Cornbelt agriculture is becoming intoxicated with ethanol euphoria. Economic development, new markets, job creation and many other benefits are touted as the outcome, but are they all realistic? The short answer is “no,” according to Iowa State University economist David Swenson, whose home state will soon have an ethanol plant in operation or planned in all but 6 counties, and will be a corn deficit state. (IA a corn deficit state?)(original study below ↓)
In all, there is enough uncertainty in the ethanol industry both in its current configuration and in its anticipated future manifestations for prudent analysts to exercise extreme caution when making claims as to the net economic product in this country that is attributable to ethanol, who the linked beneficiaries of this increment are, and where they are. Most of the current efforts grossly overstate the regional, state, and national effects of the ethanol industry.
Welcome to the ethanol boom, the closest America’s farmers may get to an investment bubble… But ethanol is far from the sure moneymaker its boosters say it is. In fact, some of the very forces behind the boom might undermine ethanol’s prospects as an investment over the next few years.
We have to look at the hierarchy of value for agricultural land use; food first, then feed and last fuel. Today we are providing subsidy to fuel uses while often erecting barriers to new food and feed technologies," (Cargill CEO) Staley said.
If there were ever a time when the truth in advertising standards should be put back into place, it’s now — during the current (third) attempt to convince the public that the massive use of corn–derived ethanol in our gasoline supply will alleviate our need for foreign oil. Ultimately, the answer to just one question determines ethanol’s actual usefulness as a gasoline extender: "If the government hadn’t mandated this product, would it survive in a free market?" Doubtful — but the misinformation superhighway has been rerouted to convince the public its energy salvation is at hand.
The answer is the American public. The question was: Who would spend 10 cents to 20 cents more per gallon for gasoline that reduces mileage, degrades your car, destroys fish and wildlife, increases air pollution, and makes the United States more dependent on foreign oil?
It (ethanol) is an expensive way to help the environment and it is an expensive way to increase rural employment or raise farm incomes. If we want to achieve any of those objectives, there are alternatives that will give more bang for the buck.
The whole principle of buying a private company that’s not profitable and very illiquid… is not necessarily a good idea for the general public. Almost never have I found these private limited partnership things work out well for the investor.
The notion that we can ferment up to a third of all corn for ethanol demand takes the madness to a new level. ADM recognizes the vulnerability this strategy of a monocrop reliance and is desperately trying to force a normalization of Cuba trade in order to begin modernization of that rogue country's low cost sugar industry. Sugar is a more efficient feedstock for ethanol. Of course, this objective is never mentioned.
Ethanol made from large–scale corn cropping is about as close to being a renewable resource as World Wrestling Federation wrestling is to being an Olympic event. On second thought, the high-powered PR machine now touting ethanol could probably persuade the Olympics to add some feather boas to the Greco–Roman event.
Major agricultural lenders say cash–flow analyses show that the Minnesota plants need subsidies of at least 15 cents a gallon higher than the 10 cents Pawlenty wants to stay afloat and repay debt.
The history of the ethanol subsidy reveals that politicians took advantage of energy concerns in the 1970s to put the transfer in place and since then have engaged in deliberate attempts to distort information flows and to obfuscate the underlying objective of the ethanol program in order to sustain it. Ethanol is an example of special–interest transfers that are promoted by claims of positive spill–over effects. The ethanol subsidy was first used to camouflage farm program costs and facilitate the channeling of funds to corn producers. Today, under the FAIR Act, the objective is relatively more conspicuous and direct, to increase the demand for corn. Corn–state politicians remain intense proponents, and they continue to stress broad benefits of ethanol beyond what the evidence would warrant.
Dust in the air darkens the sky around an ADM grain elevator in Goodland, Kansas. Photo from NOAA.
A telling comment was made in the early 1990s by James Randall, who was ADM's president at the time: ‘We have a saying in our company: "Our competitors are our friends. Our customers are the enemy."’
Despite its political muscle, in 1996 the company and three of its former executives, including Dwayne Andreas’ son Michael, were convicted of conspiring to fix the world lysine market and served time in prison. At the time, ADM’s $100 million penalty was the largest antitrust fine ever. But with the help of lawyers from Akin Gump Strauss Hauer & Feld and Williams & Connolly, the company did not face debarment from its lucrative federal contracts.
Profits from milling corn now go to Decatur instead of back into the Marshall area. "That's what was really lost," said Dean Buesing, a former co–op board member. "We came in here as dirt farmers, and now it's gone back to the way it was then."
ADM is a serial price fixer that should not be allowed to increase its market power in any market," asserted Keith Mudd, OCM vice president. "ADM and Minnesota Corn Processors are the number one and two ethanol producers in the country. Farmers are increasingly seeking to add value to their grains and oilseeds through new generation cooperatives. This acquisition will make it far more difficult for these new cooperatives to access fair and competitive markets because ADM now has an increased ability to engage in more exclusionary practices.
Though ADM continues to buy corn from local farmers, Peterson said the global corporation's ownership of the plant will dilute the profits of Minnesota farmers.
Grain merchants and processors tend to be very big and nearly invisible a combination that is hazardous to effective competition and efficient markets.
Ethanol has become a magic obeisance button for politicians. Simply mention the word and politicians grovel like trained dogs, competing to heap the most praise on ethanol and its well-connected producers.
…just as the ethanol industry seems poised for a boom, the farmers who own Minnesota's oldest and largest ethanol plant are thinking of getting out.
Some directors of Minnesota Corn Processors, including those who voted for the sale, say negotiations and supporting documentation were pushed through quickly, without adequate information.
The United States initiated enforcement action against Cargill with the issuance of notices of violation against two oilseed plants in 2002 and all 9 corn mill plants in 2003. This settlement comes three years after federal and state agreements with 12 Ethanol Plants in Minnesota and the April 2003 settlement with Archer Daniels Midland, Cargill’s largest competitor in this industry.
When Cargill Inc. disclosed a plan in May to import Brazilian ethanol by way of Central America to avoid paying tariffs, Ron Obermoller, the president of the Minnesota Corn Growers Association, described it as an example of how "some interests are helping Brazil pull ahead of us in our own game."
1. Bioethanol and biodiesel from energy crops in Europe and the United States compete for land that grows food, and when subject to realistic life-cycle analysis, are shown to return less energy than the fossil fuel energy squandered in producing them. They deplete the soil, necessitating fossil-fuel intensive fertilisers and pesticides that pollute the environment, and are also disastrous for the economy both because they entail agricultural and other subsidies, and push up the price of food and feed where food crops such as corn is involved.
Over the past decade, U.S. taxpayers have spent over $112 billion on commodity subsidies, but just seven states took in half of the money. Why? Because four commodities—corn, wheat, rice and cotton—account for 78 percent of the subsidies, and a handful of states produce most of the subsidized crops. Meanwhile, two–thirds of American's farmers and ranchers receive no direct government support, mostly because they produce food that doesn’t qualify. It’s the food you see walking down the meat or produce aisles of your local supermarket. But if agricultural aid were distributed on the basis of the economic contributions of all farmers and ranchers, and not past subsidy patterns, the map would change dramatically. …All of New England (from Maine to New Jersey), the mid–Atlantic (from Georgia to Maryland), most of the upper Midwest (ed. Wisconsin would gain), and states scattered across the South and West would at long last get government support for agriculture on par with their contribution to the nation's food and fiber production.
As farms have grown larger and fewer, many rural communities have been left in decline and decay – places without a purpose.