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DAVID KRUSE

By Staff | Feb 17, 2012

The Feb. 6 issue of Fortune magazine has some false assertions printed in it on page 12. The Grocers Association and big oil companies hired a public relations firm to disparage ethanol to the public essentially doing the dirty work of a Super-Pac in the political arena to destroy the reputation of their opponents.

They hire surrogate liars, pseudo experts, who are willing to bias their opinions for cash and advancement by feeding the media false and misleading information about ethanol. The grocers loved the days when corn was cheap, when a surplus sold below the cost of production while farmers were being kept in business with government subsidies. USDA has confirmed in studies that the price increase in corn has had very little impact on the price of food.

As I wrote last week, “The food versus fuel argument against ethanol is baloney. Only 1 percent of corn is directly consumed as food. Corn production was increased so that exports grew and when distiller’s dried grain, the 30 percent co-product of the ethanol process is added to the feed supply.

“It is the second largest feedstuff consumed in the country. Livestock producers are making money. Just 40 cents of a $3.60 microwavable dinner is for the cost of the food and less than 10 percent of that is connected to corn. Much more of the cost of the dinner is for energy and the majority of that is for transportation costs.”

Yet the Fortune article, written by Scott Cendroswski, reads “Ethanol demand has increased the global price of food by 20%.” “Some 40% of the U.S. corn is now used for fuel and by-product.”

Lies. The rising price of oil and energy is what dominantly raised food costs and ethanol actually reduces transportation costs by contributing 10 percent to aggregate fuel supply.

Why does the Grocer’s Association hate ethanol? Actually they love ethanol as by disparaging it, using ethanol as the scapegoat on which to pin blame for higher food costs, they deflect criticism from themselves.

More often than not their profits have gone up from rising prices, so the ethanol fuel versus food controversy is a convenient excuse for them to hide behind.

The ethanol industry does not use 40 percent of the corn crop. First of all, farmers expanded corn production despite poor weather so that no one has run out of corn.

Export demand is strong. Hog producers just had an excellent year feeding $6.50 corn.

Ethanol takes a slice of corn production from a larger pie and then gives back a third of that in the form of distiller’s dried grain for livestock feed. DDG is now the second largest feed stuff in the USA, ahead of soymeal.

Ethanol actually consumes closer to just 27 percent of the corn crop for fuel. Any increase in the price of corn attributed to ethanol reduced consumer fuel costs much more than it raised consumer food costs and saved taxpayers billions of dollars in farm subsidies by reducing the surplus corn supply.

Why does the oil industry hate the RFS? Because ethanol represents competition. Some inexperienced ideologues tout the free market as having no ability to do wrong. They say that if ethanol was any good that the market would make it work without mandates. That makes sense to those who don’t know any better.

The oil industry would not use ethanol if it sold for 5 cents per gallon, if it were not for the RFS. They own a competing industry with refineries and distribution infrastructure and having to include someone else’s product in their fuel, regardless of how good it is, just kills them and there is no way that they would do it if not required to.

Oil tolerated E-10, but E-85 caused them to invest millions of dollars in a Super-Pac like, ethanol-disparaging campaign. They hate E-15 and blender pumps, too. Access to the petroleum market is not free. Those that think otherwise are deluded.

Fortune magazine is essentially being used by corporate food and big oil interests to front their anti-ethanol campaign. The ethanol haters saw to it that the blender’s credit expired and was not reauthorized, the only tax hike that conservative Republican oil senators have approved of to date.

Big oil has a stake in managing the politics and the media. They are coming after the RFS now, and the Fortune article is just the beginning of their new campaign to destroy it and the ethanol industry.

We have a great ag economy and they liked it better when farmers were broke and working for government subsidies.

Never heard them complain about those subsides when corn was dirt cheap, did you? That’s because farm subsidies indirectly went to the food companies as the surplus they created depressed farm gate prices.

This will be a serious war with the anti-ethanol Super-Pac that agriculture cannot afford to lose. When the La Nina weather conditions end and we produce high yields on expanded corn acres, even with ethanol production, these “greedy bastards” will get cheap corn again.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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