Biofuels: Power on the Hill, concern in the Valley

The biofuel issue is growing in intensity on the Hill. Newly selected House Agriculture Committee Chairman Collin Peterson (D-Minn.) gave indication shortly after the election that he is favoring formation of a new subcommittee with jurisdiction over biofuels and agricultural land conservation. David Ladd, Manager of Government Affairs for AgriBank, St. Paul, Minn., says, "With renewable fuels continuing to reshape acreage allocations, as well as long-established linkages in the agricultural sector, the formation of the new subcommittee is likely to be welcomed by agricultural and rural stakeholders."

Ladd says, however, that the move is likely to bring about a number of jurisdictional issues with the Energy and Commerce Committee and the Conservation, Credit, Rural Development and Research Subcommittee which currently has jurisdiction over land conservation. While it is unclear just how effective the new subcommittee would be in advancing renewable fuels initiatives, clearly the farm bill would be a vehicle to authorize new research projects for biofuels and other sources of renewable energy. Other provisions, such as ethanol mandates, would fall under the purview of Energy and Commerce, Ladd predicts.

But while the proposed subcommittee may focus research resources on biofuel production itself, the continued impact that increased production, particularly from grain sources, is expected to have on all of animal agriculture is underscoring the need for research of another kind, namely use of byproducts in livestock and poultry feeding. Bruce Kleven, St. Paul, Minn., provides governmental affairs representation for diverse agricultural interests in Minnesota and North Dakota, including poultry growers and grain and sugar beet producers. He says growers are concerned about feed, both from a cost standpoint and also from a supply standpoint.  "At the same time it seems the renewable energy freight train isn't going to slow down anytime soon, and in fact, seems to be gaining momentum," Kleven says.  "This issue has a regional effect throughout the Midwest as other states begin building more ethanol plants. One of the issues is research, if more research could be done on utilizing distillers grain for livestock feed, that would help the livestock side."

USDA Chief Economist Keith Collins addressed key ethanol-related issues in a statement before the U.S. Senate Committee on Environment and Public Works on Sept. 6. He told the committee that corn prices could set new record highs over the next five to six years and that the U.S. will need substantial increases in corn acreage to prevent exports from declining and livestock profitability from falling, pointing to the Conservation Reserve Program (CRP), which has 36 million acres set aside from crop production for environmental reasons, as a potential source of additional crop acreage. That solution is not without controversy. Worldwide increased production of biofuels already has environmentalists concerned about devastations to the world's natural resources to feed the biofuel boom, triggering global debates over food versus fuel positions, and the true "green cost" of producing "green energy." And with U.S. corn ethanol production increasing, it's expected that other exporters, such as Brazil and Argentina, will have to supply more corn to the world market as world meat demand rises, raising additional concerns that environmentally sensitive lands may be cleared for agriculture production.

Collins also predicted that ethanol plants will likely continue to operate even if corn prices rise well above historical record highs and that plants will be able to bid corn away from a variety of other uses over a wide range of corn prices.

Collins also told Senate committee members that corn alone cannot meet the U.S. demand for biofuels and that cellulosic ethanol production appears to be the best renewable alternative for reducing crude oil imports.

Indeed, the House Agriculture Committee is expected to place a great deal of focus on cellulosic ethanol, which many scientists contend could prove to be more efficient to make than corn or sugar-based ethanol, according to Ladd.

And while cost and availability of corn for feed are looming questions for poultry and livestock producers, Tyson Foods Inc. announced in November that renewable energy is expected to add to Tyson's bottom line in future years. A cross functional team, led by Tyson Corporate Strategy and Development, has been exploring ways to commercialize the company's vast supply of animal fat into biofuels. The work led to the creation of a new business unit called Tyson Renewable Energy, which is expected to move forward on initiatives to produce the biofuels. The new unit is also examining the potential use of poultry litter to generate energy and other products.

"The charter of the Division is consistent with our value-up strategy,' since it's focused on increasing margins on our byproducts," according to Jeff Webster of Tyson Corporate Strategy and Development. "It also supports our core value of environmental stewardship."

This recent map produced by the Renewable Fuels Association shows 106 biorefineries in production and 48 under construction, with plants clustered primarily in the cornbelt region. But recent proposals for production of biofuels from sources other than traditional grains may change the face of production in the future. As of December 31, there were 110 grain ethanol biorefineries with the capacity to produce more than 5.3 billion gallons of ethanol. An additional 79 construction projects are underway that will add nearly 6 billion gallons of new ethanol production capacity.