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Tuesday, May 19, 2009

The Latest Challenge To Biofuels Would Seem To Be Easily Overcome, But It May Not Be!

Every farmer has fought for years to develop new markets and create an additional demand for his crops. Ethanol’s long history finally shifted into road gear in 2006 with the help of federal mandates. Soydiesel does not have quite the history, but has consumed sufficient quantities if soybean oil to help push the market higher. However, both are facing one of the biggest challenges of their life, and the share of biofuels in the farm economy has raised some serious questions.

Suddenly, the ethanol and soydiesel industries have found themselves having to answer charges they are villains in the global warming debate. The US EPA raised the issue with a proposed rule adverse to biofuels. Most folks would stop in their tracks at such an allegation because they thought biofuels were supposed to replace petroleum fuels that were contributing to global warming. How can ethanol and soydiesel be worse than petroleum in that debate?

The issue involves, what is called, “indirect land use.” Those concerned about the issue allege that production of ethanol and soy diesel are forcing more land to be converted to crops both here and abroad and clearing land for row crop production is a contributor to global warming. That is their argument in a nutshell. Coming to the defense of biofuels during a Congressional hearing was Chief USDA economist Joe Glauber. Glauber says biofuel production may increase land under cultivation, but estimates of the magnitude vary. Part of the immediate negative impact on ethanol will be seen by the policies adopted in California which take indirect land use into account as contributing to greenhouse gas emissions, a move that would potentially exclude Cornbelt ethanol from the California market.

Glauber says corn based ethanol will stabilize at the 15 billion gallon level in the near future, then added requirements will come from biomass sources. He says last year 3.7 billion bushels of corn went into ethanol refineries, and by the 2015/16 marketing year, that volume will top out at 4.8 billion bushels. At that time corn planting will require 86 to 90- million acres and the average yield is expected to be 169 bushels per acre. His point is that increased yields, as well as a slight increase in acreage will achieve ethanol’s requirement for corn.

Also, Glauber says cropland has varied widely in the US over the past 30 years, ranging from 297 million in 1981 to less than 245 million in early 1990. Planted acreage for the eight major row crops was 253 million last year, and is estimated to be 246 million this year. So, Glauber is saying acreage for row crop production in the US has been 50 million acres higher than it is now.

Globally, the estimate of biofuel production is more difficult to estimate says the USDA Chief Economist. He says one recently study estimated more than 26 million acres would be used for ethanol production world wide, which was 1.8 million acres per billion gallons of ethanol. On the other side was a study that said a 1% increase in ethanol used would result in a 0.009 percent increase in world crop area. Even the California policy makers did not agree with the initial estimate, saying each one billion gallons of ethanol would require only 726,000 acres.

Glauber says one of the uncertainties in everyone’s calculations is the projected corn yield, particularly on land that is brought into cultivation just to meet the ethanol demand. Lower yields would require more land, and good yields would require less land. Glauber says the latter can be seen in Brazil where new lands opened for soybean production were double the national average. Alternately, switching from one crop to a biofuel crop can be easily done if both are typically cultivated on that farm, but more difficult if forestland is being reclaimed for row crops.

Another uncertainty is the growth of yields over time, since many studies do not take into consideration USDA’s estimate that corn yields increase by 2 bushels per year per acre, and if that is applied to the rest of the world, then corn yields would be 10% higher in 2015 than the California study estimates. And Glauber says higher crop prices will likely result in increased crop yields.

One product that may be misunderstood by critics is DDGS, which can replace as much as 1.271 pounds of corn for animal feed per 1 pound of DDGS. The California policy is based on a one to one ratio for DDGS replacement of corn.

Glauber says there is no question that increased demand for biofuels will have an impact on crop acreage, but the big question is magnitude, and higher crop yields that are expected mean there will be less acreage needed than many critics are projecting.

Summary:
While federal policies current favor biofuel production and use, proposals by the US EPA would curtail some of the impact by saying US biofuel production is causing more land to be cultivated in the US and around the world, and that would contribute to more global warming. Critics may not be looking at the fact that US corn production for ethanol is near the maximum, and that yields here and abroad will climb to the point that increased acreage will not be needed.

Posted by Stu Ellis on 05/19 at 01:31 AM | Permalink

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Posted by: LittleWally at May 30, 2009 6:06AM

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