The Hancock-Henderson Quill, Inc.
The Renewable Fuel Standard
This information is in response to a recent article in a neighboring newspaper and the continued deceptive, monopolistic misinformation being spread by the American Petroleum Institute (API) about ethanol. Big oil companies scare tactics have made the elimination of the Renewable Fuel Standard (RFS) their number one priority, and without it, the ethanol industry and resulting rural economies will suffer dramatically. With that being said, I want to take a moment to help educate American energy consumers on what' s going on as a result of positive effects from the ethanol industry.
First, ethanol IS sustainable, oil is not. As much as antagonists would want you to believe, the days of easy oil are long over. While demand for oil continues to rise worldwide, companies are spending more money and wasting more resources chasing unconventional oil to keep up, resorting to fracking shale and extracting oil from heavy tar sand in Canada. These practices are only cost-effective when oil hovers at $100 plus for one barrel. That' s why all of this new supply is not keeping consumers from paying more at the pump. And for those who believe Bakken Oil in the Dakotas is the answer to our nation' s energy needs, I will point out that last year, the U.S. ethanol industry produced 3.5 times the amount of fuel that could be made from Bakken Oil.
Big River and other ethanol plants efficiently turn corn into multiple products making both food and fuel. The fact of the matter is that when an ethanol plant takes in corn to convert to fuel, it only uses the starch of the kernel. The rest is converted into high-protein animal feed called dried distiller grains (DDGs). DDGs are high quality livestock feed that contains a higher percentage of protein than corn, while being sold at a lower price. Cattle producers buy modified distillers grain and feed up to 10-17 pounds per day saving money on protein, energy, and fiber. Swine producers save money on feed from using DDGs fat for energy; saving on buying protein as well, and resulting in better herd health from the fiber in dried distiller grains. In 2012, U.S. ethanol plants manufactured 37.8 million tons of feed, which represents enough food for 200 million people a year and the equivalent of seven hamburgers for every person on the planet. Non-food grade corn oil is also extracted for consumption with feed as well as for usage in biodiesel markets. Zein protein is available for its excellent film-forming properties in food as well as non-food applications such as encapsulated vitamins and essential minerals, packaging, and the creation of two polymer products called hydrogels and microspheres. Microspheres and hydrogels are looked to be able to deliver drugs or other small ingredient quantities. Purified zein could provide an alternative to petroleum-based resins, which degrade slowly, or natural chicle, which is imported. It can also have a big role in the production of bio plastics and paper coatings.
Stating that ethanol is driving up livestock feed prices because corn isn' t being sold at $2.00 per bushel is misleading and only telling half the story. Of the global grain supply, only 2.9% was used by the ethanol industry in 2012, according to the U.S. Department of Agriculture (USDA). This leaves more than 97% of the world' s grain for other purposes.
With the help of profits from ethanol, innovative technology has helped farmers produce nearly 20 bushels more corn per acre. Since enacted, the RFS (Renewable Fuel Standard) has provided an economic incentive for scientists and farmers to sustainably produce more bushels of corn on an acre of existing corn land. The RFS and the ethanol industry have also helped create market-driven value for corn so foreign nations that previously relied on the U.S. can now grow their own corn. Over the past ten years, farmers around the world have responded to positive agricultural economics. Increases of 54% to corn production are projected for the 2013/2014 crop year providing economic success to poor rural areas while supplying the feed and food to meet our growing needs. Also, with modern seed technology and advanced farming practices, the world capacity to produce continues to have great upward potential. As a result, blaming ethanol for increase in food prices has been proven to be quite irresponsible. The truth is when corn is $7 per bushel, the value of corn in a box of corn flakes is 8 cents, the value of one pound of chicken is 25 cents, and the value of one gallon of milk is 23 cents. That same box of corn flakes, like most other food products, travels an average of 1500 miles from the farm to the grocery store. In the end, of the food dollar, only 16 cents of what a consumer purchases is spent on food, while 84 cents is spent on transportation, marketing, food processing charges, etc. Long term trends show the UN Food Price Index and World Crude Oil prices mirror each other quite closely. In fact, recent consumer price index data shows that food price inflation in 2012 was the second lowest annual rate in the last 20 years.
Since the Renewable Fuel Standard went into effect, oil imports have been cut from 60% in 2005 to 40% in 2012 and an official with the Energy Information Association (EIA) says that will drop to 35% by the end of 2013. It has completely eliminated the import of gasoline. The savings to the U.S., by decreasing fuel costs, were over $50 billion in 2011. Ethanol is making life better for farms, rural communities, and the nation as a whole. It is continuing to revitalize rural towns. The renewable fuel sector has driven increases of $500 billion in American' s farm assets since 2007, and increased investment in rural communities across the country.
Ethanol has created over 87,000 jobs and supports 295,000 more. The RFS also supports over 400,000 jobs across the country from farmers to manufacturers to clean tech entrepreneurs. In 2011, ethanol saved consumers $1.09 at the pump and $1,200 annually.
America will not run out of field corn. Corn is renewable. Each year a new crop is planted, grown, and harvested. That is the essence of the word renewable. And even with weather anomalies such as last year' s drought, farmers still produced the 8th largest corn crop in history. Corn is grown on every single continent except one; Antarctica. The United States is the largest producer of corn, growing more than 12 billion bushels every year.
There are many industrial and non-food uses for corn also. Corn can be found in more than 3,500 different products you may not realize. Examples of everyday items include:
Toothpaste Batteries Cosmetics Medicines
Paper Products Paints & Dyes Inks Glues
Detergents Cleaners Fireworks Lubricants
Rubber Tires Body Lotions(
With over 3,500 different non-food product uses of corn, why have antagonists singled out ethanol as the cause for raising food prices?
Moving on, adversaries blame ethanol for increases in the price of land, making it risky for young farmers to take on debt in hopes grain prices will remain strong. That would be a self- fulfilling prophesy if opinion articles with unsubstantiated and untrue facts destroy the ethanol industry. It should be noted that the recent increase in farmland values have helped keep American agriculture strong. For so many years, prices remained so low that younger generations, our best and brightest, would receive their education and move off to urban areas, because farming was simply not profitable. Now, in large part due to ethanol production, the opportunity exists for younger generations to return to their family farms to work, raise a family, and make a profit. What a delightful change to have younger generations returning to carry on the legacy of the family farm. It is this type of ripple effect from the production of ethanol that has led to the most robust farm economy in my lifetime and made American agriculture the envy of the world. I, for one, am glad to see younger generations coming back home and raising their families in the communities in which they grew up. I am proud they have the opportunity to return to the family farm and carry on their family' s legacy, and are excited to do this.
This is just one more reason that ethanol production has been so critical to building up the booming farm economy we are experiencing today. This is why we must continue to defend the Renewable Fuel Standard and fuels from the farm, as they are creating economic opportunities and revitalizing rural economies across America' s heartland.
Antagonists of ethanol seem to have oversimplified some very complex, macro-economic dynamics, ignoring such things as Federal Reserve Policy and credit markets, in an attempt to blame the ethanol industry for such things as high fuel and land prices. Furthermore, their short sighted thinking does not propose a solution for the excess national and international supplier of over 5 billion bushels of corn that would flood the market without the ethanol demand segment.
Possibly the antagonists' solution is to flood these supplies back into the market and return to the era of $2/bushel corn prices and high taxpayer subsidies. Tax payer appetite for those subsidies and deficit budget constraints seem to be quite limited on re-engaging those subsidies. Contenders may have also overlooked the benefits of school districts, libraries, rural roads and other taxing bodies receiving increased revenues due to higher valuations of land. Ethanol employees, as well as beneficiaries of the ethanol industry (farmers and rural investors), buy houses, groceries, insurance, appliances, and many other consumer goods; compounding the benefits of the industry.
The author of Ethanol may have reached its limit mentions Big River Resources in his article. In checking with appropriate personnel, I find that within a 50 mile radius of West Burlington, this plant alone, not considering other locations, specifically paid over $10,000,000 to vendors for the year ending December 2012. That does not include capital expenditures and real estate taxes, nor does it include other benefits the communities in our area received from high incomes to rural workers including farm income and dividends. Those dollars were additionally used to further increase our economy by being spent on automobiles, farm inputs, farm machinery and many, many other items.
Additionally, a discussion of the benefits of clean air and resulting health benefits create a balance of trade that has been left out. This includes advantages of boosting octane and performance as noted by NASCAR and Indianapolis 500 racing groups across the world. Ag related companies and their employees such as New Holland, Monsanto, Pioneer, Syngenta, Dekalb, John Deere, Case IH, Caterpillar, and many others have also gained from the monetary benefits of ethanol. It is important to note that there is no need for soldiers to guard corn fields with over 500 gallons of ethanol, several gallons of non-food grade corn oil, 18 pounds of zein protein, and 3,000 pounds of DDGs available in every acre grown. No soldier comes back in a body bag, crippled and deformed for life from protecting the valuable acres of ethanol and co-products in a corn field.
An attack on the Renewable Fuel Standard (RFS) to limit ethanol is an attack on rural prosperity. Imagine if an individual or group threated to damage the dams on the Mississippi River system, or destroy the rail and bridges maintained by the BNSF. Recognizing the enormous economic damage that would prevail, our government and countrymen would be up in arms to defend against such destruction.
Elimination of the RFS would have an equally negative impact to our rural economies, because the Midwest is very reliant on the prosperity of agriculture. New crop corn is now being bid in the $4/bushel level. It costs over $5.50/bushel to produce. Destroying the demand for over 5 billion bushels of corn used for ethanol in this country alone would cause a replay of the economic disaster in the 80' s. Anti-RFS Americans do not see the importance of maintaining such an important standard.
Big River Resources is made up primarily of investors who are your neighbors. Local, proud Americans who stepped up to the plate and took the risk to further improve our rural communities. Why not be supportive of the effort? With the support of the Renewable Fuel Standard, I can assure all non-believers that ethanol will continuing to grow and flourish. The future is bright and only just beginning to shine, invigorating our rural communities!
Raymond E. Defenbaugh
President, CEO, Chairman
Big River Resources, LLC
This letter has the full approval of the Big River Resources management team, the Big River Resources LLC board, Big River Resources United Energy board, Big River Prairie Gold LLC board, and the farmer driven, local directors of Big River Resources Cooperative; a grain and livestock family farmer owned company.