South Africa biofuel subsidy unlikely

South Africa is unlikely to introduce subsidies to support a biofuels programme that has been billed as a lifeline for the struggling farming sector, a cabinet minister said on Monday.

The Southern African Biofuels Association says it needs between 2 billion rand and five billion rand a year from the government to get a capital intensive industry off the ground.

Science and Technology Minister Mosibudi Mangena said lending support to the renewable energy industry might spark an outcry from farmers, whose fortunes have waned after a massive cut in state subsidies in post-apartheid South Africa.

Jason E. Berkes
www.jasonberkes.com

ADM Profit Doubles, But Corn-Processing Falls

Archer Daniels Midland Co. said fiscal-fourth-quarter profit more than doubled, boosted by asset sales and a 28% increase in revenue, but operating profit in its corn-processing business fell on higher corn costs and lower ethanol sales volume.

The Decatur, Ill., agricultural-processing company, which also said results were hurt by declining margins in its oilseeds business, said it expects its corn costs to fall amid a strong global crop and ethanol prices to decline.

Jason E. Berkes
www.jasonberkes.com

US Government crazy about Ethanol

The Senate bill calls for annual ethanol production to rise to 36 billion gallons by 2022, up from less than 5 billion gallons in 2006. Let's set aside the question of whether that's enough ethanol to wean us from an oil addiction that has us consuming more than 140 billion gallons of gasoline each year. What are the economic implications of trying to meet the Senate target?

The U.S. Department of Agriculture projects that 12.5 billion bushels of corn will be produced this year. A bushel of corn yields about 2.7 gallons of ethanol, so we'll harvest enough corn to distill nearly 34 billion gallons. However, if we used all of our corn for ethanol, what would we feed our livestock? Where would we get high-fructose corn syrup to sweeten our sodas? It's not an all-or-nothing proposition, but even with increases in corn acreage and yields, the demand for ethanol is already crowding out other corn products.

For years, ethanol's share of corn production hovered around 5 percent. But since 2000, that percentage has grown. Last year, about 20 percent of the American corn crop was used for alcohol-based fuels, and the USDA projects that it will be more than 30 percent by 2016. Even at 30 percent it's unlikely that we'll meet the Senate's goal using corn ethanol. But perhaps that's just as well, because it'll be very hard to build the necessary distillation and distribution capacity by 2022.

Jason E. Berkes
www.jasonberkes.com

The ethanol effect

It seems that everywhere you turn these days, ethanol is being touted as the best way to reduce our dependence on foreign oil. The U.S. Senate recently passed a bill calling for a huge increase in domestic ethanol production over the next 15 years. Auto makers and oil companies run feel-good commercials about their commitment to ethanol. And no leading presidential candidate dares deviate from the gospel of ethanol, thanks to the prominence of corn-producing Iowa in the nominating process.

Yet the public debate about ethanol has been pretty one-sided. We hear a great deal about the potential benefits and very little about the costs. But in economics, there's no such thing as a free lunch. Benefits never come without costs.

I will now start blogging here about ethanol.

Jason Berkes
www.jasonberkes.com

Construction worker dies after fall at Benson ethanol plant

A Missouri man is dead after falling from a tank under construction at an ethanol plant in western Minnesota.

It happened yesterday at the Chippewa Valley Ethanol Company plant in Benson.

Swift County Sheriff Scott Mattison says the victim 26-year-old James Pippen of Nevada, Missouri was an employee of U-S-A Tank Sales of Seneca, Missouri.

The sheriff's office got a call around 2:15 in the afternoon that a construction worker had fallen about 60 feet inside a tank under construction at the plant.

Rescuers took Pippen to the Swift County Hospital in Benson, where he died.

The accident is under investigation by the state OSHA division, the Swift County coroner and the sheriff's office.

Jason Berkes
www.jasonberkes.com