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 Business News | August 2007 
More Sugar for Ethanol
 Alan Guebert - The Prairie Star
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| | A visitor walks behind a car running with Bio-Ethanol during a motor show in Geneva, Switzerland, in March. A global shift toward renewable energy could jack up food prices by up to 80 percent as crops and farmland are diverted to producing biofuels, an international agricultural think-tank warned Thursday. (AFP/Fabrice Coffrini) |
In the down-is-up world of American biofuels, success carries enormous costs.
The latest evidence of these costs is an amendment tucked into the House version of the 2007 Farm Bill: As Mexican granular sugar flows into the U.S. in 2008, the U.S. Department of Agriculture will oversee a supply-balancing program where the extra sugar can be purchased, at government-subsidized prices, by American ethanol makers.
Sweet, eh?
Moreover, if you think American corn growers are angered by seeing part of their fast-growing ethanol market legislatively handed to imported sugar, think again. Ethanol, after all, is the rabbit hole that swallowed logic and economics long ago.
When passed in 1993, the North American Free Trade Agreement gave the U.S. a 15-year reprieve from unrestricted, low-cost Mexican sugar exports. The Mexicans hated the delay, but it was a key compromise cut by both Presidents Bush (I) and Clinton to get NAFTA through Congress.
During the resulting moratorium, however, U.S. high fructose corn syrup - made from taxpayer-subsidized, cheap American corn - poured into Mexico to replace that nation’s granular sugar in much of its soft drink industry.
Now, 15 years later, the piper must be paid.
Or, as Phillip Brasher of the Des Moines Register noted in his late-July story on the Mexican sugar dance: “Yes, high fructose corn syrup will be sent to Mexico to displace the sugar that will then be shipped to the United States. Taxpayers can then pay for buying surplus sugar and converting it to ethanol.”
The U.S. sugar industry doesn’t explain the swap so starkly. To it, the House plan is an extension of current sugar import policy - a tangle of mandated, USDA-administrated quotas, tariffs and loans - that protects American producers from a tidal wave of vastly cheaper imports.
In short, the fact that we have a domestic sugar price support program (as do most nations) leads us to need another program to handle the 2008-and-thereafter unrestricted Mexican imports.
“If this provision were not in place,” explains Phillip Hayes of the American Sugar Alliance, “there could be very costly, massive domestic (USDA loan) forfeitures by U.S. sugar producers.”
But avoiding those potential forfeitures by directing subsidized sugar to ethanol makers won’t be cheap either.
Although the Congressional Budget Office doesn’t break out the exact cost of “Feedstock Flexibility Program” - the official name of the sugar idea - it estimates the House Ag Committee’s 2007 “bioenergy program... would increase that program’s direct spending by... $3.1 billion over the 2008-2017 period.”
All of this is too much for Dr. Thomas Elam of FarmEcon.com, a food industry consulting firm in Carmel, Ind. Recently, Elam wrote a commentary that called today’s subsidy-dripping biofuel policies self-defeating.
“(G)rain-based U.S. fuel ethanol production,” wrote Elam, “is using an increasing amount of our global food supply, increasing the global costs of food production and contributing almost nothing to U.S. or global net energy supplies.
“In effect,” he continued, “by linking food and energy costs through grain-based ethanol, we have ransomed our food costs as well as our energy costs to the interests of global crude oil producers.”
A believer in “free trade and free markets,” Elam, in an Aug. 21 telephone interview, characterized the sugar-to-ethanol idea as “insane.”
But, he adds with a hint of sarcasm, “I’ve been waiting for ethanol makers to ask for more subsidies because of the high price of corn due to their ethanol making.”
Not surprisingly, Elam’s commentary, a variation of which is posted at http://farmecon.com, has not been received well by the ethanol-fueled ag lobby. “In fact, you’re the first person to call me about it,” he notes.
Welcome to a really small club, Doc.
Guebert can be reached at: agcomm, 21673 Lago Dr., Delavan, IL 61734, or by email at agcomm@sbcglobal.net |
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