The food fuel debate

I made some calls today about the food-fuel debate. I'll have some coverage in The Packer about bio fuels and their impact on food prices, and the tangential news related to the U.N. Food Summit in Rome. One economist I talked with today said there has been no study that he has seen that does a thorough job of providing a number - a measure of how production of corn-based ethanol impacts food prices - and then backing that number up with deconstructing the various economic factors. More on that later...

Hope to have a Fresh Talk keyboard chat tomorrow morning with David Mitchell of The Packer, who has been the lead writer on the tomato/salmonella coverage.

Also extended an invitation to Kathy Means and Amy Philpott to participate in Fresh Talk as guest bloggers. That offer also goes out to any other association executive/industry leaders out there who would like to add some reasoned perspective to the news of the day. Email me at tkarst@thepacker.com if you are interested.

GMA: Cut the ethanol tariff

The spike in corn prices is keeping the heat on biofuels as the whole supply chain deals with higher food costs. One issue is the tariff on imported ethanol. Here the GMA stakes out a position that the tariff should decline in concert the 45-cent credit to blenders mandated in the new farm bill. From GMA:


(Washington, DC) - The Grocery Manufacturers Association today issued the following statement by Vice President for Federal Affairs Scott Faber in regard to Senator Dianne Feinstein’s (D-CA) and Senator Judd Gregg’s (R-NH) introduction of legislation intended to reduce the tariff on imported ethanol. Co-sponsored by Senators Maria Cantwell (D-WA), Wayne Allard (R-CO), and Susan Collins (R-ME) the bill would reduce the 54-cent ethanol tariff on imported sugar-based ethanol from Brazil to 45 cents, matching the 45-cent tax credit to blenders as mandated by the new Farm Bill.

“This week in Rome, there was broad agreement that U.S. food-to-fuel mandates and subsidies have greatly contributed to distortions in the world grain market and have led to skyrocketing food prices here and around the globe. We applaud Senators Feinstein, Gregg, Cantwell, Allard and Collins for taking another step in the right direction by proposing the reconsideration of the tariff on imported ethanol. However, the current food crisis will not be solved by incremental change alone; urgent Congressional action is needed to examine the full economic and environmental impacts of these food-to-fuel taxes and subsidies immediately.”

In Lenexa and in Rome - Biofuels

Agriculture Under Secretary Tom Dorr visited The Packer's offices yesterday, primarily speaking of biofuels and food security. I'll have more on that session with Dorr and Vance Publishing editors in my column and on the blog later, but suffice to say he put up a spirited defense of the ethanol industry and warned about short sighted policy moves that could derail America's efforts to find alternative fuels.

The issue of biofuels impact on food prices and availability is looming large at the UN Food Security Summit in Rome. Agriculture Secretary Ed Schafer held a Q and A and I pulled out a couple of questions during the exchange. For one thing, I was shocked to hear Schafer's prediction of a 40% rise in global food prices in the next year; I thought I had been hearing numbers in the single digits, at least in the U.S. From the press conference:

REPORTER: Is it that biofuels is just one of many contributing factors? Could you have any figures for that for them? How many percent is that, is it contributes to the --

SEC. SCHAFER: Yes. We at the United States Department of Agriculture have plotted the long-term trends of price, yield, availability and consumption; and as we've looked at those long-term trends we are anticipating this year an over 40 percent increase in food price inflation globally, 43 percent approximately. Of that, we can identify 2 to 3 percent of that price increase that is driven by biofuels. The majority of course is energy, and the second largest piece, or about equal piece, is the increase in consumption around the world which is using up the production stocks. So we see, the figures that we are looking at show about a 3 percent, or a little under, effort on biofuels to actually drive up the inflation rate of food.

REPORTER: Stephanie Holmes from BBC News Website. You said that you think the biofuels only accounts for 2 to 3 percent of the price increases, but there are lots of estimates from respected think tanks that say it might account for up to a third. Would the U.S. consider a moratorium on biofuels? And also, they are not considered incredibly efficient; corn-based ethanol is not considered efficient as a means of making energy.

SEC. SCHAFER: Well, you know, it's one of the great things about the gathering of many countries at a place like this is to be able to reconcile numbers, to look at differences of opinion, to be able to come to some conclusion about what real numbers are or are not. As we have looked at the numbers, I think it's very clear that biofuels produce about 3 percent or a little under of the global inflation rate of food.

And beyond that, they produce many, many positive aspects. By biofuels, we are reducing the use of the high cost of oil today. It's been estimated that we have, through biofuel production, reduced a million barrels a day of oil and oil record high prices. That makes a lot of difference to a lot of people. Environmentally, they are better. There are things in gasoline, in the aromatics and things, that aren't as good as biofuels; they are better issue. And whether the energy created is more or less, is again a subject of debate. Many studies show that it is not [less energy created], that it is an efficient producer of energy. That as we've increased the fermenting process and increased the yields per acre of corn for instance as a feedstock, we have seen the cost of that energy go down and the efficiency go up.

So I am hoping that we can get together on some of these vast differences of opinion and come to some conclusions as to what's real versus what's emotional or socially driven or governmental driven. But you know, let's look at the numbers and see what we have.

REPORTER: Can I ask you, what's the subsidy the U.S. provides for its corn biofuel each year?

SEC. SCHAFER: We have currently a subsidy of [51] cents per gallon. That is going down now to [45] cents per gallon.

REPORTER: But as a total on an annual basis, how many millions of dollars?

SEC. SCHAFER: Oh, I don't know that number.

REPORTER: ... is that right?

SEC. SCHAFER: I don't know the number. Does anybody? We can get the number. We'll get the number for you. Thank you.

She's asking the total.

Mapping the grapevine genome

This USDA FAS report describes the successful mapping of the grapevine genome by Italian and French scientists. It is the first fruit and the second crop, after rice, to have its genome mapped. More from the USDA report:

Italian Agriculture Minister Paolo De Castro praised Italian and French researchers for successfully mapping the grapevine genome. De Castro is quoted as saying: "This is a great achievement in the field of plant biology. The first analysis of a grapevine's genome can now be applied to developing ones that are resistant to disease, reducing the need to use chemical pesticides." Italy and France signed an agreement in Paris in August 2005 to conduct the six million Euro, joint research program into a vine's genome. The goals of the project were: to boost the quality of wines and to protect grapevines from pests, making them better for consumers' health. The results of the joint Italo-French project were published in the August 26, 2007 edition of the magazine Nature. The project involved researchers from various Italian universities working under a national consortium and the Institute for Applied Genomics (IGA). The French researchers came from the National Genoscope Center and the Institute National per Recherche Agronomique (National Institute for Agronomic Research). According to project chief Enrico Pe', from the University of Milan, the scheme did not involve genetically modified organisms, which remain highly controversial in Europe. Other goals of the Italo-French project were to increase the grapevine’s tolerance of salty and dry conditions, so that grapes can be grown on a wider geographical scale; to produce stronger vines, reducing pruning requirements and loss due to extreme weather conditions; and to delve into the mechanisms of plant reproduction so that vines can be produced in all kinds of conditions. This latest breakthrough could create a foundation for improving quality traits of currently cultivated grapevines and establish new varieties that are more capable of adapting to the soil and weather conditions of specific wine-growing regions. The European wine industry is currently undergoing a full-scale reform of the common wine market in an attempt to revamp what has become an ailing sector. (Please see FAS Italy GAIN report IT6005 for the Wine Report). World wine retail sales are expected to increase over the next decade, with most of the growth expected for wine selling at more than $5 per bottle. Therefore, improving the quality of wine is seen as essential by European wine makers in order to maintain their competitiveness. The grapevine is the first fruit plant (cultivated for both fruit and beverage) and the second crop plant, after rice, to have its’ genome sequenced. Increased knowledge of the biological mechanisms of the grapevine will allow targeted approaches to reduce the number and impact of parasites, which could enable a sustainable, environmentally sound, farming policy. Results of the study can be viewed on line at the following websites:
http://www.vitisgenome.it
http://wwwappliedgenomics.org
http://www.genoscope.cns.fr/vitis