Administration: Food-versus-fuel debate is 'manageable'

by Jay Sjerven
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WASHINGTON — President George W. Bush and senior administration officials affirmed the U.S. commitment to expanding the production and use of biofuels when they spoke before 2,800 delegates from 119 nations assembled at the Washington International Renewable Energy Conference March 4-6. President Bush and his advisers said they recognized expanded use of food and feed crops in the production of biofuels had some effect on U.S. and world food prices, but indicated other factors exerted greater upward pressure on food prices in recent months. The administration view was the food-versus-fuel controversy is "manageable."

President Bush said of the biofuels biodiesel may be the most promising, indicating biodiesel refineries may produce fuel from soybean oil and other vegetable oils as well as from recycled cooking grease and other waste materials.

"Last year, we produced 450 million gallons of biodiesel," President Bush said. "That’s up 80% from 2006. Today, there are more than 650 biodiesel fueling stations in America. There are hundreds of fleet owners that use biodiesel to fuel their trucks, and that’s just the beginning of what is going to be a substantial change in our driving habits.

"Corn ethanol holds a lot of promise, but there are challenges. If you’re a hog raiser in the U.S., you’re beginning to worry about the cost of corn to feed your animals. I’m beginning to hear complaints from our cattlemen about the high price of corn. The high price of corn is beginning to affect the price of food.

"And so we got to do something about it, and the best thing to do is not to retreat from our commitment to alternative fuels, but to spend research and development money on alternatives to ethanol made from other materials. For example, cellulosic ethanol holds a lot of promise."

Secretary of Agriculture Ed Schafer said renewable fuels are a "wonderful" alternative to fossil fuels and a "fantastic" opportunity for agriculture, but they are not without environmental concerns.

"We cannot simply declare ethanol to be the fuel of the future and start sowing all our fields with corn and sugar cane and other potential feed stocks," he said. "Developing a productive industry for renewables while also meeting the existing needs for agriculture products will take careful planning."

Mr. Schafer said biofuel energy will not be viable unless it graduates from subsidy support.

"So while we are committed to funding fledgling renewable industries and technologies, it is also important that we help them reach the point where they can stand on their own," he said.

Similarly, they must be produced in a way that is safe for the environment and allows a variety of land uses, Mr. Schafer said.

"For biofuels in particular, we need to balance the demand for renewable energy with the requirements of our food supply," he said. "We need to be cognizant of the indirect relationship between rising food prices and greater demand for biofuels."

Charles Conner, deputy secretary of agriculture, addressed the food-versus-fuel controversy directly. Mr. Conner said the consumer food price index is projected to rise 3% to 4% in 2008 compared with the average historical food price increase of about 2.5%. The rise in food costs is due to a number of factors, Mr. Conner asserted.

"The global economy is prospering, which stimulates the demand for food, and subsequently, the cost," he said. "Labor, advertising and energy costs have all risen in the past year as well. Unquestionably, the greater demand for crops like corn that the renewable fuel industry creates has an impact on food prices. But so do all of these other factors."

Mr. Conner said rising energy costs themselves might have the largest impact on rising food prices. He said in the United States, food processing consumes more energy than any other sector, when one considers energy

required for washing, refrigerating, packaging and transportation. Crude oil prices more than tripled in the last five years, increasing the costs of all these operations and contributing to the rise in food prices.

"In the long term, one of the best ways to keep food prices stable is to keep energy costs stable," Mr. Conner said. "And doing that will require us to create alternative energy sources."

Thomas C. Dorr, undersecretary of agriculture for rural development, asserted at the conference there was "a general recognition that the food versus fuel debate is manageable."

"Many critics have a surprisingly static view of the production potential of modern agriculture," Mr. Dorr added. "From an agricultural perspective, the question is not food versus fuel. It is food and fuel, and both are opportunities for agriculture."

Critics of the government’s ethanol program were unconvinced. Richard Lobb, a spokesman for the National Chicken Council, Washington, said members of his industry incurred $3.4 billion in additional feed costs because of rising prices of corn and soybeans since September 2006. He acknowledged other factors contributed to the recent rise in feed and food prices but asserted the principal driver of higher prices was billions of dollars in federal incentives to the ethanol industry, including a 51c-per-gallon tax credit to companies blending ethanol into the gasoline supply.

Mr. Lobb said while crop shortfalls may provide temporary boosts to food prices, the distortions caused by the federal ethanol policy promised long-term strength in corn and soybean prices resulting in higher costs to meat producers and to the consuming public.

Mr. Lobb said the free market best weighs how crops should be used and that the federal government in providing subsidies to the ethanol sector put a "heavy thumb" on the scale, tilting usage increasingly in favor of the ethanol industry at the expense of the food industry. Addressing the argument that cellulosic materials ultimately will be more important than corn in the production of ethanol, Mr. Lobb made reference to a senior agribusiness executive who stated "cellulosic ethanol is about seven years down the road, and always will be."

This article can also be found in the digital edition of Food Business News, March 18, 2008, starting on Page 1. Click here to search that archive.

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