[R-G] Ethanol, Food, and McCain

[Yoshie Furuhashi]

Probably John McCain is the best candidate for poor people of the
world outside the USA. -- Yoshie

<http://online.wsj.com/article/SB120977546363664225.html?mod=googlenews_wsj>
Corn Ethanol Loses More Support
GOP Senators Ask
EPA to Backtrack
As Food Prices Rise
By SIOBHAN HUGHES, IAN TALLEY and ANJALI CORDEIRO
May 3, 2008; Page A4

FUEL VS. FOOD?

•  The News: Two dozen Republican senators asked the EPA to ease
requirements on blending ethanol and other renewable fuels into the
gasoline supply, saying the mandates are contributing to increases in
food prices.
•  The Outlook: The move is the latest sign that Washington's support
for turning corn into motor fuel is wavering.

Rising food prices are prodding lawmakers in Washington to rethink
support for corn ethanol.

Two dozen Republican senators on Friday -- including Republican
presidential candidate John McCain (R., Ariz.) -- asked the
Environmental Protection Agency to ease requirements mandated by
Congress in 2007 to blend more ethanol and other renewable fuels into
the gasoline supply.

The lawmakers said the mandates are contributing to a sharp increase
in food prices. Sen. McCain has been a critic of ethanol subsidies.

"With the price of everyday meat, chicken, bread and eggs rapidly
increasing, we are asking the EPA to use the flexibility that Congress
gave them, because so many families cannot afford the increasing
prices at the grocery store," said Sen. Kay Bailey Hutchison (R.,
Texas). An EPA spokesman couldn't be reached to comment.

EPA spokesman Jonathan Shradar said the agency "will review waiver
requests and respond according to the law."

The move by the Republican Senate group is the latest sign that
Washington's support for turning corn into motor fuel is wavering in
the face of soaring food prices, despite the popularity of ethanol
subsidies in farm states critical to the November election.

So far, it appears unlikely that Washington, in an election year, will
make the drastic cuts sought by critics of U.S. subsidies for corn
ethanol. Any loosening of recently passed mandates for increased
ethanol production will have to overcome opposition from senators
representing farm states.

President Bush also reiterated his support for corn ethanol on Friday.
While acknowledging that ethanol is "part of" the reason for high food
prices, he disputed the notion that it has been "the main cost driver"
for recent food-price increases. "I'd much rather be paying our
farmers when we go to the gas pump than paying some nation that may
not like us," Mr. Bush said in a speech Friday.

But there are signs that doubts about the wisdom of current U.S.
biofuels policy are mounting.

A number of lawmakers are calling for loosening mandates in a recently
passed energy law that requires an increase in the use of ethanol and
other biofuels to roughly five times their current level -- to 36
billion gallons by 2022.

A sweeping farm bill under debate in the Senate also seeks to
accelerate the U.S. shift away from corn-based ethanol, by proposing
to reduce the current 51-cents-a-gallon credit to 45 cents. Another
provision of the bill would create a new credit for so-called
cellulosic ethanol -- which is made from wood chips, switch grass and
other nonfood stocks -- of $1.01 a gallon.

Cellulosic ethanol has yet to be proven on a commercial level, and
many analysts don't expect a full-scale production facility to come
online for years.

"Good Growth: Corn-futures prices, settlement price on the near-month
contract on the Chicago Board of Trade, "
<http://s.wsj.net/public/resources/images/NA-AQ312_WETHAN_20080502210014.gif>

There are also signs of anti-ethanol backlash at the state level. The
governors of Texas and Connecticut have requested that the EPA issue
waivers from the mandate, arguing that the ethanol impact on food
prices is too onerous.

At a congressional hearing Thursday, the chief economist at the U.S.
Department of Agriculture said that government subsidies to ethanol
producers are having a sizable impact on food prices, but that the
impact is limited to corn-based food goods and will likely subside
over time.

Joseph Glauber told a hearing of the Joint Economic Committee that
ethanol subsidies were having an "important impact" on corn prices,
directly pushing up the cost of corn-based food. He told the panel
that retail food prices increased by 4% in 2007, the fastest since
1990.

Prices are forecast to grow a further 4% to 4.5% in 2008, he said. But
he said the ethanol subsidies had little to do with sharp increases in
wheat and rice prices.

That has had more to do with the rapid increase in demand from
countries like China and India for high-quality foods, and adverse
weather conditions in major wheat producers like Australia and Canada,
which has severely reduced yields. Mr. Glauber said he anticipated the
ethanol impact on the price of corn would moderate over time.

While U.S. lawmakers debate the link between the rapid increase in
U.S. corn-based ethanol production and the escalation in food prices
world-wide, several large packaged-food companies are hiring lobbyists
or using their internal teams to make a stronger case against the use
of corn to produce biofuels like ethanol.

A March lobbying-registration form shows that Kraft Foods Inc. has
hired Washington firm DLA Piper to lobby on "energy policy and
initiatives related to biofuels." An April lobbying report filed by
Kellogg Co. discloses that the company has been lobbying on the
subject of "ethanol production," among other things.

In the past week, Kraft -- which makes its namesake cheese singles,
Philadelphia cream cheese and Oscar Mayer meats -- posted a 13% drop
in first-quarter net income amid surging costs for dairy, wheat and
other commodities. Kellogg posted a 1.9% drop in first-quarter net
income as price boosts didn't completely offset the surging costs for
ingredients and a higher tax rate.

--Corey Boles contributed to this article.

Write to Anjali Cordeiro at anjali.cordeiro at dowjones.com

<http://www.signonsandiego.com/news/politics/20080409-0659-usa-politics-energy.html>
FACTBOX-U.S. presidential candidates on energy issues
REUTERS
6:59 a.m. April 9, 2008

. . . . . . . . . . . . . . . . . . . .

+ BIOFUELS

Clinton – Make 60 billion gallons of biofuels available for trucks and
cars by 2030.

Obama – Boost renewable fuel standard to at least 60 billion gallons
of advanced biofuels like cellulosic ethanol by 2030; build out
ethanol distribution infrastructure; mandate that all new vehicles be
"flexfuel" by the end of 2012; produce 2 billion gallons of
"cellulosic" ethanol from non-corn sources like switchgrass by 2013.

McCain – Favors ethanol incentives after opposing them in the past.
Generally opposes subsidies and tariffs that distort marketplace.

<http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2008/04/13/cant_eat_ethanol/>
Can't eat ethanol

April 13, 2008

CORN should be used for food, not motor fuel, and yet the United
States is committed to a policy that encourages farmers to turn an
increasing amount of their crop into ethanol. This may save the nation
a bit of the cost of imported oil, but it increases global-warming
gases and contributes to higher food prices.

Candidates for president need to tell Americans the truth about
ethanol, but they are falling over themselves in pursuit of the farm
belt vote. Barack Obama and Hillary Clinton want more ethanol
factories built than even President Bush envisaged when he called for
15 percent of US gasoline consumption to be replaced by alternative
fuels by 2017. John McCain, who correctly called the ethanol push a
boondoggle in 2000, now says that it is "a very important way to
achieve energy independence."

Ethanol consumes almost a quarter of US corn production. The energy
self-sufficiency that all the candidates seek should not come at the
expense of the environment or the food supply.

Increased ethanol production isn't the only reason for the spike in
food costs, but it's more controllable than drought in Australia,
higher fertilizer prices, or increased meat consumption by the
Chinese. Unlike those other cost-drivers, ethanol production is
encouraged by federal subsidies.

And it's not as though ethanol improves the environment. When
emissions inherent in the production process are included, ethanol
consumption generates more carbon dioxide per gallon than gasoline,
according to a recent report in Science magazine. Conversion of other
cultivated biomass, such as sugarcane or soy, presents the same
problem. The only biofuel that produces a net benefit is agricultural
waste, an uncertain source. The best way for American motorists to use
less gasoline is to drive fewer miles in lighter vehicles, rather than
rely on the false promise of biofuels.

Ethanol is now usually sold as 10 percent of a fuel mixture that
includes 90 percent gasoline. The government is thinking of ordering
refiners to raise the blend to 15 or 20 percent. Ethanol generates
fewer miles per gallon than regular gasoline. And it's not yet clear,
according to the Consumer Reports website, how the higher blends would
affect engine reliability or longevity. Before the government insists
on a new fuel blend, it ought to examine all the hidden costs.

Greater use of ethanol means more greenhouse gases and more expensive
food for people and livestock, hardly a fair exchange. There's a
limited role for biofuels, excluding corn, in reducing oil imports
from volatile regions, but they are not the answer to the world's need
for energy on the go.
-- 
Yoshie
<http://montages.blogspot.com/>