Changes ahead in US corn belt

As the American congress reviews 30 years of corn-ethanol subsidies, rising worldwide food costs and famine in east Africa are casting biofuel production in a negative light. Suzanne Goldenberg reports.

There were times when Arlyn Schipper could almost feel heroic on his family farm in the heart of America’s corn belt.

His 1,619 hectares in Iowa, planted almost entirely with corn, were helping to feed a nation – or at least help put fuel in its petrol tanks, as his crop was processed into corn ethanol.

Schipper still sees it that way. It is just he feels America has moved on, or as he put it: “The country has turned on us.”

The debt crisis, and the challenge of finding US$1.3 trillion in budget cuts, has forced the US Congress to re-examine three decades of government subsidies for corn ethanol.

Drought and famine in the Horn of Africa have exposed further a negative consequence of biofuel production: the global food crisis. By competing with food crops for land, large-scale biofuel production has constricted supply and so helped to boost food prices across the world. This has led to a backlash against biofuels such as corn ethanol from environmentalists and development charities.

“Ten years ago this was the greatest thing since apple pie – ethanol. A lot of farmers invested in this, and a lot of farmers invested in ethanol plants. Everybody wanted it. Our country wanted it. It was a renewable resource,” said Schipper. “And now that we have got all of this money tied up in this, it’s kind of turned on us.”

Many will feel that corn farmers have had it pretty good. And the ethanol industry still has a mighty hold on America’s corn belt. The United States is projected to produce 14 billion US gallons (53 billion litres) of corn ethanol this year at 200 refineries across the middle-west.

Iowa, the state that leads the country in corn production, will use 58% of its crop for ethanol this year. Some farmers, such as Schipper, may sell up to 70% of their crop to produce ethanol. There are five ethanol plants within an 80-kilometre radius of his home.

But a five-year boom in corn-ethanol production may be coming to an end – or at least that is the hope of some campaigners. “I think we are at a turning point. We are full to the gills with corn ethanol,” said Jeremy Martin, who studies biofuels for the Union of Concerned Scientists.

As a start, the industry is due to lose some of its government support – more than 30 years after then-president Jimmy Carter first began subsidising corn ethanol to encourage the development of a homegrown plant-based fuel [then known as gasohol].

Congress is expected to end US$6 billion in subsidies during debt-deal negotiations. The subsidy had been directed to the oil companies that incorporate ethanol into their products. Fuel sold at most US petrol stations contains 10% ethanol.

The industry had hoped to re-direct some of those funds to refitting petrol stations to take more ethanol. But the subsequent debt-ceiling deal, with its demands for deep cuts, now makes that unlikely. “Washington is out of money,” said Sheila Karpf, an analyst at the Environmental Working Group (EWG), a non-profit organisation.

For farmers like Schipper, and ethanol refiners, there will be little reason to mourn the end of the subsidy, arguing that the money went directly to the oil industry anyway.

But campaign groups estimate it could lead to a slight drop in corn prices. “It won’t make a big difference for American farmers but it could make a huge difference for impoverished countries,” said Marie Brill, an analyst at ActionAid.

This year’s famine in the Horn of Africa has a complex set of causes, not least a dire political situation that has made problems much worse, but it has served to refocus attention on global food prices – and the impact of harvesting biofuels such as corn ethanol.

The United States is the world’s largest producer and exporter of corn, giving it the power to dictate global market responses.

Domestic consumption of corn, as ethanol, has driven up the price of corn worldwide
, according to studies from the World Bank and other institutions.

The high prices for corn – while driving hunger in Africa – have encouraged other farmers to turn over land from wheat, soybeans, or even pasture to corn production. US farmers planted 92 million acres of corn (about 37 million hectares) this year, up four million acres (1.6 million hectares) from last year, according to the US department of agriculture.

“Farmers are tearing up any little bit of land they had and going to corn,” said Brill.

The concern over the global food crisis added new urgency to existing campaigns against the use of corn ethanol. Environmental groups had argued that its use offered no meaningful reduction in greenhouse-gas emissions – in part because of the vast use of energy and water in the ethanol conversion process.

As a food crop, corn is also far more damaging to the environment than other crops, such as soybeans, because it uses more pesticides and fertiliser.

“The research is very clear by now. Turning corn into ethanol is not environmentally sound,” said Bill Freese of the Center for Food Safety. “It’s really an environmental disaster.”

That was not what was intended when Carter promoted the use of ethanol as a way to get America off imported oil, offering subsidies to industries to mix the fuel. The industry never really took off – even with federal funding. By 2001, 6% of the corn crop was being used to produce ethanol.

But energy policies brought in by president George W Bush, which set production quotas to encourage the use of biofuels, allowed the industry to take off. By last year, nearly 40% of US corn was going to produce ethanol.

It is less clear, however, whether corn ethanol is having a major effect in helping America reduce its consumption of fossil fuels. Corn ethanol will displace just 7% of the energy supplied by oil by 2020, according to an analysis by Freese.

Campaigners argue that the entrenched government supports for corn ethanol have blocked the development of next generations of greener biofuels made from wood or the non-edible parts of plants, known as cellulosic biofuels. “Corn ethanol continues to eat up the market and even eat up grant money that could be used to spur the development of cellulosic and advanced biofuels,” said the EWG’s Karpf.

Getting rid of corn ethanol, though, is another matter. For farmers like Schipper, ethanol has brought stability and new sources of income. Over the years, the refineries have spun off another industry in animal feed lots, which buy up the unused parts of the corn kernel to feed to pigs, cattle and turkeys. Harris Haywood, who runs a nearby cattle-finishing operation, estimates he has cut back on his corn use by 40% by re-using the product from the ethanol refinery.

“The by-product is very, very cheap compared with corn,” he said. “And we can vary our rations to the price of corn. If corn gets cheap, we can use more corn.” It’s going to be hard to persuade farmers away from ethanol.

Despite the increasingly negative public opinion on ethanol, Schipper is just not ready to give up on it yet. “Everything has turned on us, but ethanol is still a great thing,” he said. “It’s been good for us.”

Copyright © Guardian News and Media Limited 2011

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