Agriculture accounts for a fifth of the Iowa gross domestic product. Its expansion could fuel a dramatic reversal of the trends that have defined the state. The brain drain could be turned around. The atrophied political muscle of a thinning and aging population could be rejuvenated. But the mechanism to guide that ambition is not fully developed.
The state in the past has utilized the Iowa Values fund to encourage companies to expand or to move to the state. The Vision Iowa fund has been tapped by communities to develop local attractions. The question now is how will the Culver energy program shape the state now and for the coming generations.
Here to discuss these issues is Lowell Junkins. In a previous life, he was president of the Iowa Senate and a gubernatorial candidate. More recently he has been Lee County Economic Development Director, a post he left to join the private sector as an energy entrepreneur. David Yepsen is a columnist for “The Des Moines Register”. And also joining the discussion is Chris McGowan, the Executive Vice President of the Siouxland initiative, a tri-state economic development consortium.
Well, first of all, how do you assess the potential economic impact on Iowa of the ethanol explosion that we may be about to experience?
Junkins: Well, we're going to see a glut of some of the by-products; that's going to be problematic for us as we look at pricing. Ethanol pricing today is slightly higher than what we would like for it to be. It's going to be a challenge for us going forward. Because it's a challenge, I think we have to answer the question as to whether or not we're going to look at ethanol, bio diesel, and alternative fuels as something that's going to benefit Iowa, the agriculture that's in Iowa, or is this really -- is this a national security problem. The governor said a moment ago, you know, this is going to be something bigger than just agriculture. If there's a national security problem, we will find the ways to pull together all the elements necessary. If it's just agriculture and value-added agriculture, we're going to see the peaks and valleys we've seen before and we're not really going to develop this resource as we ought to protect ourselves.
Mundt: David, can ethanol be phrased in that context and be successful?
Yepsen: I think so but I think there's one component of this that I hear a lot of legislators talking about that they need to focus on, and that is research money for cellulosic ethanol, the next generation of ethanol plants. I mean you're right, we are building a lot of ethanol plants in Iowa and all the problems you just got through describing. But the next generation, the ability to make this stuff out of switch grass and corn stoves and that, that's really where they've got to take the industry down. So I think there will be a big push for some research dollars there.
Mundt: Chris, between now and then, you're looking at a situation I would assume in western Iowa where there's a great economic impact, some of it quite good, but you must also be hearing from people in agriculture and elsewhere who are concerned about the impact on corn prices to livestock prices eventually to all of us going into the grocery store.
McGowan: Yeah, we certainly haven't seen these corn prices in some time, but overall I think they're very positive for the state of Iowa. There's a chance that we might see some benefits that we didn't initially anticipate. We may see some cattle -- livestock operations return to Iowa that relocated to the south sometime ago. As corn gets more expensive, the transportation of corn to those feedlots is also a price that they're not ready to bear if they're paying for expensive corn. We may see some of that investment back in the state of Iowa. That's very positive.
Mundt: Lowell, do you think that there's a potential to lose an interest in the environment here in Iowa? We've always been in this balanced situation between trying to promote our agriculture and also being concerned about our resources. Ethanol is going to put a new strain on those resources.
Junkins: It does for sure. And as we look at most of the alternative opportunities that we have, there's going to be strain and it's going to be in different places. We'll have strain if we go to cellulosic ethanol on set-aside programs, as an example. So there's got to be some balancing as we go forward. This cannot just be an economic capital boon of some sort, or there will be a huge price for our children to pay and our grandchildren to pay.
Yepsen: This is the toughest balancing act politicians in this state have to do, Todd, balancing agriculture against the environment, how do we make both of them compatible. One of the benefits of having a healthy state treasury right now is I think the political leaders are committed to putting more dollars into water cleanup and prevention programs so that hopefully the state can do both.
Mundt: And that's the message apparently coming from John Culver in his appointment of the DNR director.
Yepsen: I think that's a big part of it was let's balance this, let's try to work things out, let's try to let these groups get together and not fight. The Iowa way is to work together, but it's tough to balance sometimes the needs of agriculture against the pressures on the environment.
Junkins: I might say that the by-products that come off of the ethanol and the bio diesel may in fact be the industry -- the long term of the industries that we want. When you look at bio diesel and the glycerine that comes off, that glycerine today, the bottom is falling out of the market. It could be used -- it could be used for pharmaceuticals, as an example. It could be used for feed. There's a lot of opportunities that cluster around these things that we see as being giant kind of saviors for us today. I think in the final analysis it's going to be the cluster businesses that are really going to give us the economic foundation that we look at needing in the future as opposed to ethanol or bio diesel itself.
Mundt: And, Chris, just about fifteen seconds left.
McGowan: Yeah, there are ways to balance agriculture and environment. I'm working with a company today that is focused on powering an ethanol plant with the manure from the cattle and bringing all those operations, a feedlot and an ethanol plant together, and that's very, very positive.