Refrigerated & Frozen Foodsturns to American Frozen Food Institute President and CEO Leslie Sarasin for a Washington, D.C., insider’s view of ethanol subsidies and the “food-versus-fuel” debate.
Refrigerated & Frozen Foods:Do you sense that Congress recognizes the unintended effects of ethanol programs (higher prices, now being followed by plant closures)? If so, what are legislators (and/or federal regulators) saying?
Sarasin:Yes, I do. There are Congressional hearings taking place in which our legislators are examining ethanol’s impact on global hunger, the environment, small businesses, big businesses, and the obvious ones: the price of gas and the cost of food. Elected officials have heard from their constituents on the issue, and now Congress is trying to take a more holistic approach to finding alternative sources of energy by looking at it from every angle. But, as you can imagine, there are divergent opinions about the extent to which ethanol can be blamed for global hunger and the rising cost of food.
Senator Kay Bailey Hutchison has introduced legislation freezing the corn-based ethanol mandate at this year’s level (9 billion gallons). Senator Hutchison said “the ethanol mandate is clearly causing unintended consequences on food prices for American consumers. Freezing the mandate is in the best interests of consumers, who cannot afford the increasing prices at the grocery store due to the mandate diverting corn from food to fuel.”
The bill is cosponsored by Sens. John McCain (R-AZ), John Cornyn (R-TX), Wayne Allard (R-CO), John Barrasso (R-WY), Tom Coburn (R-OK), Susan Collins (R-ME), Jim DeMint (R-SC), Elizabeth Dole (R-NC), Mike Enzi (R-WY), Ted Stevens (R-AK), and John Sununu (R-NH).
Three new ethanol bills were introduced on May 22. Rep. Shadegg (R-AZ) is sponsoring legislation to remove the additional tariff on ethanol. Rep. Burgess (R-TX) is sponsoring legislation that would authorize the President to waive renewable fuel mandates. Rep. Barton (R-TX) is sponsoring legislation to reduce the blender credit for ethanol derived from food, and to study the effects of food-derived ethanol on food producers.
R&FF:What’s your opinion regarding the projected timeline for this issue? Was there anything during USDA’s recent outlook forum to suggest this is a short-term matter that will be resolved with better crop planning, as opposed to a flawed plan that will continue to have lingering, long-term ill effects?
Sarasin:According to U.S. Agriculture Department (USDA) projections, much of the additional corn needed for ethanol production as a result of federal mandates will be diverted from exports and feed. However, if the U.S. is successful in its pursuit of cellulosic biomass as a raw material for the production of ethanol, corn would become just one of several crops and plant-based materials used to make ethanol.
USDA has also stated that large corn stocks will enable ethanol production to increase initially without requiring much additional adjustment in the corn market. But the agency also has been careful to say that as long as corn is the primary feedstock for ethanol in the U.S., sustained increases in ethanol production will eventually require major adjustments in the corn market.
R&FF:Any chance that a prominent legislator or government official might admit that this entire venture was miscalculated?
Sarasin:Even legislators from “Corn Belt” states are acknowledging that ethanol has potentially had some adverse effects, but there are too many other factors to be examined before we can fully assess ethanol’s impact on things like food prices and the environment.
For politicians, ethanol is proving to be a tough campaign issue. Being pro-ethanol is a position many politicians take because of the economic benefits it creates for different segments of the population – farmers and farm states, companies that manufacture agricultural and ethanol-processing equipment, etc.
I also believe that more politicians of both parties want to be seen as being “green” or environmentally friendly, and believe that supporting increased ethanol production helps cast themselves in this light. However, all the questions being raised about ethanol are causing some to question just how “green” it really is.
As we head toward the November elections, I do not see any influential politicians standing in complete opposition to ethanol mandates and subsidies. Perhaps after a new president and Congress are sworn in we’ll see someone take a more hard-line stance on the issue.
R&FF:We see that a group of food industry associations (primarily in meat and dairy) have formed the Coalition for Balanced Food & Fuel Policy. In your opinion, what could more mainstream frozen food processors do to express their feelings?
Sarasin:AFFI has been in discussion with its member companies to identify the impact ethanol mandates are having on their respective businesses and how the frozen food industry will address the issue. And we have heard anecdotally from our members about some of the ill-effects of increased federal mandates for the production of biofuels, specifically corn-based ethanol.
I expect that we will continue to evaluate the value of corn-based ethanol as a viable alternative to petroleum well into for the foreseeable future as data is collected, and as economists, politicians, business leaders and consumer advocates continue to measure and weigh the effects of government mandates.
AFFI believes ethanol is not going to solve the world’s energy problems on its own – it is just one in a portfolio of new energy technologies that will be needed over the coming years. Technology will be the solution to the ever-increasing need for affordable and available energy.
The frozen food industry supports our country’s goal of addressing energy and environmental security issues through the implementation of a sensible energy policy that accomplishes this without negatively impacting American businesses and working families. We will continue advocating on behalf of the industry and communicating the interests of our members to elected officials and opinion leaders.
R&FFAre you aware of the presidential candidates even mentioning this issue?
Sarasin:Reducing America’s dependence on foreign sources of energy will most likely be part of the platform of both parties’ nominees. While there is little argument that our nation needs to adopt policies that will help move us towards energy independence, policymakers’ opinions differ on how best to address the issue. The candidates’ views on ethanol vary widely and are likely influenced by political ideology and geography.Both parties’ platforms are still being developed. As we move towards the nominating conventions we will likely hear more about the candidates’ stances on the “food-versus-fuel” issue and energy policy as a whole.
State of the debate
July 2, 2008