April 2, 2007

 

Ethanol law fuels action in US Congress
 

 

At least 23 pieces of legislation for ethanol have been filed in the US Congress offered to promote and provide new subsidies to the fast-growing industry, which was built largely on the back of a 54-cent-a-gallon tax break to begin with.

 

Senatorial and presidential candidates who once abhorred financial support for ethanol have shifted gears. Presidential hopeful Senator Hillary Clinton (D-N.Y.) is now supporting biofuels, despite her earlier concerns that ethanol tax breaks would not benefit New York. Another candidate, Senator John McCain (R-Ariz.), has abandoned an earlier stance that scoffed endorsers of ethanol.

 

Senator Barack Obama (D-Ill.), too, has recognized the importance of the new ethanol economy not only for his home state but also for neighbouring Iowa, which holds presidential alliances in early 2008. Obama is the author of the legislation that proposed ethanol as a means of reducing US dependence on foreign oil.

 

Senator Tom Harkin (D-Iowa), chairman of the Senate Agriculture Committee have also prioritized ethanol and other cellulosic fuel made from grasses, grains and woods as he noted "energy is going to be the engine that drives the farm bill".

 

The industry got its boost from President George Bush's endorsement of biofuel growth which includes developing six biorefineries worth US$385 million for the next four years.

 

Bush has also proposed spending US$150 million on "biomass" fuel research and set a national goal of producing 35 billion gallons of ethanol by 2017.

 

Harkin and Senator Richard Lugar (R-Ind.) are also eyeing an ambitious goal of 60 billion gallons by 2030.

 

Ethanol, a combustible alcohol distilled from corn, has been under development since the late 1970s, when former President Jimmy Carter has heavily promoted it after the oil crisis.

 

The flux of ethanol started when oil prices have reached US$70 a barrel and foreign investors have also started financing new plants and refurbished old ones.

 

Ethanol production jumped to more than 5 billion gallons a year in 2006, and industry experts predict that an additional 6 billion gallons will be available when ethanol plants now under construction come on line in a year or two.

 

With this, business with ethanol, which cost about US$100 million per plant, has been brisk and can pay itself in just a few years.

 

Minnesota Representative Collin Peterson (D-Minn.), chairman of the House Agriculture Committee said the limiting factors of building ethanol plants is the lack of stainless steel and contractors and engineers since they have been booked until 2010. He added that "thousands of people are already getting into business."

 

Twenty-one states now have ethanol plants, according to the Renewable Fuels Association, and more states are expected to build plants when the use of grasses and wood becomes more common.

 

However, the US livestock economy is reeling from the effects of the ethanol boom with corn prices soaring above US$4 a bushel. The price rise is a boon to corn farmers but a severe penalty for chicken, hog and cattle producers, who face rising feed costs and possible feed shortages.

 

The US Department of Agriculture (USDA) predicted Friday (March 30) that the number of acres planted with corn would jump 15 percent over last year, with a nearly identical drop in soybean acres planted.

 

The USDA's 2007 spring prospective plantings report also said that the number of Illinois acres planted in corn this year would jump to a record of 12.9 million acres, compared to 11.3 million in 2006. The state comes in second in Iowa which is expected to plant 13.9 million acres of corn this year.

 

Farmers like Art Bunting, who farms 2,000 corn and soybeans acres in Dwight, Illinois about 50 miles southwest of Chicago, said he plans to increase his corn acreage by 10 percent this year as "there's more profit in the area of corn at the current prices than there is in soybeans."