Iowa Public Television

 

Lawmakers Tackle Growing Ethanol Industry

posted on January 12, 2007


Hello, I'm Mark Pearson. The government released its final 2006 crop production report this week and the numbers pushed corn prices sharply higher.

USDA pegged 2006 corn production at 10.535 billion bushels... down 210 million bushels from last month's guess and well below last year's record harvest of more than 11 billion bushels.

Corn ending stocks are predicted to decline to 752 million bushels -- down a whopping 1.2 billion bushels from last year.

The numbers brought out the bulls in the corn pit, where the nearby contract opened limit-up on the news. We'll have more on the markets, of course, in our discussion segment later in the program.

This winter's dramatic run-up in corn prices differs from many previous markets in one key respect... Rather than being driven by short supplies, this rally is paced by blistering demand for corn to produce ethanol. And as Congress got down to business this week, ethanol was on the agenda.

Lawmakers Tackle Growing Ethanol Industry

The 110th U.S. Senate began debate and hearings this week, as Democrats started the clock on an ambitious 100-hour agenda.

A familiar face on Capitol Hill, Iowa Sen. Tom Harkin, reclaimed his post as Senate Agriculture Chairman and spent his first hours discussing the future of renewable energy's role in national security.

Sen. Tom Harkin, D – Iowa: "We are initiating a major transformation of our energy sector. To one that is far more efficient. Is much less reliant on fossil fuels and on imported oil and is utilizing vastly more domestically produced renewable energy."

Representatives from America's ethanol, livestock, and energy industries spent time addressing the committee. USDA Chief Economist Keith Collins painted a picture of renewable energy that was falling short of its potential.

Keith Collins, USDA Chief Economist: "To move ethanol beyond low-level blending, and substantially reduce crude oil imports, infrastructure such as E85 pumps and flexible fuel vehicles are needed. But to ensure there development, ethanol supplies must exceed what is practical from corn. Breakthroughs that allow commercialization of cellulosic ethanol are needed to provide that supply boost."

Much of the Senate testimony addressed the positive expectations from an expanding biofuels industry. But high demand for corn ethanol is viewed as a negative factor for livestock producers that are forced to pay rising feedstock prices. The growing feed prices were a large concern for the panel's lone livestock representative.

Gene Gourley, Iowa Pork Producers: "There is also a job component. While a 100 million gallon ethanol plant creates approximately 80 jobs. If we divert that from pork production, the corn needed to produce that ethanol would cost 800 on-farm jobs."

While Gourley predicated high feed prices to squeeze some producers out of business, Collins argued that high demand for corn ethanol may develop into a positive outcome for the livestock sector.

Keith Collins, USDA Chief Economist: "Sustained high feed costs, if you hold everything else equal, mean lower livestock, poultry and meat production, and higher livestock product prices. But as those product prices rise it will restore profits to the livestock sector but there is some period of adjustment." (

 


Tags: agriculture biofuels Congress ethanol government industry news renewable fuels