Monday, May 19, 2014

Big Corn Versus Big Oil

"(Reuters) - Six months ago the U.S. oil industry scored a surprise win against farm groups when the Obama administration proposed slashing the amount of ethanol refiners must blend into gasoline, a move that could save them billions of dollars.

Stunned by the reversal, producers of the corn-based biofuel and their supporters are now fighting back ahead of a June deadline for the Environmental Protection Agency (EPA) to make a final decision on the cut.

The clash has been portrayed as a battle between "Big Oil" and "Big Corn," two powerful and deep-pocketed lobbies. But a Reuters review of public records and interviews with lawmakers, lobbyists and executives reveals a more complex picture.

A private equity firm and an airline helped convince the Obama administration to backtrack, at least temporarily, on a policy it has supported for years: requiring steadily-rising volumes of ethanol to be blended into gasoline each year, a key to shifting U.S. energy consumption toward renewable sources.

The ethanol industry, blindsided by the proposed cut, has said it was orchestrated by "Big Oil." However, some of the most effective players in the fight weren't traditional oil majors but rather The Carlyle Group and Delta Air Lines, owners of two Philadelphia-area refiners.

Together with their allies, the refiners helped convince policymakers that the rising mandates would cripple their businesses and threaten thousands of jobs."

This discussion hit the ag media and the main stream media again this weekend.  Once again, follow the money.  "Big corn" doesn't have the deeper pockets of "big oil," though both have been very powerful.

Corn prices are just above half their peak in 2012.  Still, we grind over 400,000 bushels of corn per day in southwest Ohio, plus feed and exports.

Margins are close on whether we will make a profit on corn or not this year, but that's the gamble.  Lower your costs or get out of business.

Ed

5 comments:

  1. Ed I hate too get into any ethanol debate as its pretty emotional for some . As a livestock guy that grows most of his feed maybe ethanol saved us independents and on the other side it made our grain farming side vulnerable too guys "willing to do or pay" anything to get another farm . From mandates to farm subsidies some time soon we will have to decide what kind of farms we really want too have in the future . Oldest son is Chem.Eng. with major oil company and he does not bash ethanol ,just says its not the "best" fuel source . He also says just producing generic gasoline is the same as growing feed corn. Swings in ag prices always are pretty drastic ,not uncommon for 50% price moves in grains or meats in the same yr. Ideally it would be nice too have more farmers owning the ground they farm and be a little diversified as being a tenant farmer your whole life isn't the answer. But hey what do us old guys know-regards-kevin in Ontario

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  2. Yes I know. Dad was a livestock man. I wonder how he would temper my views? 2 million pounds of ground beef has to be destroyed because of a deadly, deadly strain of E. Coli, Wolverine Packing in Detroit which is probably all over Ohio. Sickness near death reported in Ohio in the news last night.

    It is a very testy issue and when we went from $2 corn to $8 corn it changed EVERYTHING. Of course, the Bakken and everything else did, too.

    The small farmer was eliminated before ethanol or $8 corn so maybe there was a link there? Maybe not, I remember when we were building stills in the 70's after the first oil embargo and $10 beans.

    Ed

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  3. Hi Ed. The ethanol debate is always interesting. The amount of topsoil lost in the last 6 months in Indiana alone, just so we could grow fall-tillage driven corn should be part of the discussion I would think. The current approach used by 95% of producers is not even close to sustainable, not even close. We view that as our long-term competitive advantage but this doesn't change the fact that as an industry we are burning off soil carbon to make liquid carbon (ethanol). When your government forces someone to use your product...those being forced tend to work hard to change the governments position. smile

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  4. Just a quick question for Ken , Do you drag line on your manure or irrigate ? On our clay soils and lots of rain in sw ontario its always a struggle too get it dry enough to pull a 6,750 gal. spreader around....Like Ed I have always respected your opinions-kevin in Ontario

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