From China to America, monumental forces are driving global demand for food, feed and renewable fuel. Faced with a worldwide credit crunch, demand will probably take a breather, but the long-term trends are still strong.
Demand Surge
Can U.S. farmers grow enough crops for food, feed and fuel?
By Todd Neeley
"Importantly, one way to characterize this issue is that we are not competing for bushels," he says. "Rather, we are competing for acres. The true test of supply response will be how we allocate acres among multiple uses, including crops, forages, grazing land and habitat, among other uses. Remember here that some folks are saying that a transition away from corn ethanol to cellulosic ethanol will solve the food-versus-fuel problem. But that is an argument over bushels."
For instance, in 2007 higher market prices encouraged more corn production, and farmers planted 15 million more corn acres. Those extra corn acres largely came from soybeans and some cotton. In 2007 and 2008, Lubben adds, the prices for other commodities "joined the rally" and encouraged acres back to other crops.
Livestock red ink. As a result of production concerns in 2008, the livestock industry that relies heavily on corn for feed questions whether there will be adequate commodity supplies as the drive to produce more ethanol continues. Some want to release acres from the CRP early.
In August the U.S. Environmental Protection Agency denied a requested 50% waiver from Texas Gov.
Rick Perry and others who said the mandate calling for 9 billion gallons of ethanol production was driving up feed prices.
The Renewable Fuels Standard (RFS) calls for the production of 36 billion gallons of biofuels by 2022. That includes 21 billion gallons of cellulosic ethanol and limiting the amount of corn-based ethanol that applies to the RFS to 15 billion gallons. Ethanol capacity in the U.S. is expected to be more than 13 billion gallons in 2009, requiring more than 4 billion bushels of corn.
Following the EPA ruling, Colin Woodall, executive director of legislative affairs for the National Cattlemen's Beef Association, pointed out that for nearly half a year the cattle industry has seen losses of $150 to $200 a head, primarily as a result of higher feed costs.
"We're not against corn growers or ethanol," he stresses. "The cattle industry is based on a free-market approach. We just want the ability to compete on a level playing field for that bushel of corn."
Yield gains. Fortunately, those bushels of corn continue to grow. Advances in breeding and technology have made drastic improvements in the past 60-plus years.
By 2030, National Corn Growers Association CEO Rick Tolman says many of the major seed companies have told corn growers that 300-bushel corn is possible.
Debate has swirled as to how large a role ethanol plays in the price of corn, or whether an increased number of speculators in the markets plays a bigger role by artificially driving up prices.
Whatever the case, Tolman points out the corn industry has changed profoundly from the development of ethanol. Farmers, however, believe they should have been getting $5 corn all along. And they hope for those price levels even after cellulosic ethanol begins commercial production within the next five to 10 years.
Advanced Biofuels Remain Years Away
Federal lawmakers have made it clear that the time has come to begin moving beyond corn-based ethanol. Yet it remains to be seen when or if advanced biofuels will be commercially viable.
"That technology will develop and has great promise," says Chris Hurt, agriculture economist at Purdue University. "We just don't know if we can get the costs low enough to compete against crude oil."
In 2009, companies like Poet and BlueFire Ethanol will produce cellulosic ethanol on a pilot scale. It could take another three to five years to determine if the technology works well enough to up production. The timetable for large-scale commercial cellulosic ethanol production is still seven to 10 years.
BIODIESEL. According to the National Biodiesel Board, there are 171 plants with a capacity of about 2.2 billion gallons.
The vast majority use soybean oil as their main feedstock, and U.S. production has come to a virtual standstill because of high vegetable oil prices. The industry is in dire need of additional feedstocks and a market.
Algae oil provides big potential as a biodiesel feedstock, but is relatively unknown and undeveloped.
BIOBUTANOL. This is a potential fuel touted as having an octane level comparable to regular unleaded gasoline and the ability to blend with both gasoline and ethanol. Oil giant BP continues to hone the technology.
Butanol is primarily used as a solvent, an intermediate in chemical synthesis and a fuel in the normal combustion engine. It's currently manufactured from petroleum, though originally it was made from corn and molasses in a fermentation process.
BP and DuPont formed a partnership to develop new molecules for biobutanol production. "The program is designed to deliver by 2010 a superior biobutanol manufacturing process with economics equivalent to ethanol," according to a press release. |
"It takes stronger prices to produce," Tolman says. "There was no future in $2 corn. We see the cellulosic piece as evolutionary and not revolutionary. Frankly, corn is the first source of cellulose. We want corn to move into a higher value."
Fuel from cellulose. Most cellulosic ethanol technologies in development will rely heavily on the ability of the U.S. farmer to produce energy crops such as switchgrass, miscanthus, prairiegrass, wheat straw, corncobs and corn stover.
The future of cellulosic ethanol remains in doubt until one or several technologies emerge at the forefront and farmers hone the ability to grow, harvest, store and transport new crops.
Regardless, Chris Hurt, an agriculture economist at Purdue University, points out biofuels have changed the agricultural landscape.
"Fuel and food markets are now fairly closely linked by biofuels," he says. "But this is not to say that each will have all the grains and soy products they would like to have, or that usage in each category will be at the same levels as pre-2006.
"I think it is also clear that food will compete effectively with fuel for corn supplies," Hurt says. "In the long run, food will probably be able to outbid fuel because of the greater overall value of food compared to fuel uses for corn."
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