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Wednesday, May 07, 2008

The Chickens Are Coming Home To Roost - Ethanol

PRESIDENT'S CORNER: By Norris McDonald. I talked to Jim Perdue recently and we both agreed that ethanol is causing serious food price problems. Of course, Jim is on the front line. I agree with him that relief is needed from the ethanol mandate. This is a nationwide and global problem now. Yet looking right here in Maryland, according to Delawareonline: "Perdue expects chicken feed will cost about $200 million more this year compared to last year." Barack Obama, John McCain and about a quarter of the U.S. Senate are urging EPA Administrator Stephen Johnson to use his waiver authority to eliminate the biofuels mandate. Title XV of the Energy Policy Act of 2005 (H.R. 6) authorizes a waiver:
Cites conditions under which the Administrator may waive requirements for the renewable fuel program, based in part upon an assessment by the Secretary of Energy whether the renewable fuel requirement will likely result in significant adverse impacts on consumers on a national, regional, or state basis in 2006.

The Energy Policy Act of 2005 (H.R. 6) mandated 7.5 billion gallons of ethanol. The Energy Independence and Security Act of 2007 (H.R. 6) increased the mandate to 36 billion gallons by 2022. Although we support a mix of energy sources, we always expressed reservations about ethanol based on two primary concerns: 1) food prices and 2) increased smog (ethanol use will increase nitrogen emissions--a component of smog). There is also the water conundrum: it takes 1,700 gallons of water to produce one gallon of ethanol.

But it appears that frat hedged his bets by diversifying into the ethanol biz. Perdue formed Perdue BioEnergy LLC, a new company that focuses on the growing biofuels industry. The company currently partners with biodiesel and ethanol producers to provide feedstocks and to market co-products. In May 2006, Perdue signed an agreement to provide corn to Northeast Biofuels LLC for an ethanol plant to be built in Fulton, New York. Yet Jim's strength is chickens and his chicken business and American food prices are being hurt by ethanol.

At signing of the 2005 law
Photo: Norris & Jim at Perdue AgriRecycle Plant

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