Editor’s note: Here is text of Sen. Charles Grassley’s Aug. 1 statement on the Senate floor about Renewable Fuels Standard, ethanol, and the U.S. corn crop.

The president and CEO of Smithfield Foods, Larry Pope, took to the opinion pages of the Wall Street Journal again to blame all that ails him on the Renewable Fuels Standard.

Some may recall that he did the same thing back in April of 2010 when commodity prices were rising. At that time, he perpetuated a smear campaign and blamed ethanol in an attempt to deflect blame for rising food prices while boosting Smithfield’s profits. And now he’s at it again.

I may start referring to Mr. Pope as Henny Penny from the children’s folk tale Chicken Little. Every time Smithfield has to pay a little more to America’s corn farmers to feed his hogs, Mr. Pope starts up with the same argument that the sky is falling and it’s all ethanol’s fault.

Mr. Pope continues to perpetuate the myth that ethanol production consumes 40 percent of the U.S. corn crop. Mr. Pope states, “ethanol now consumes more corn than animal agriculture does.”

Everyone with a basic understanding of a livestock farm, a corn kernel or an ethanol plant knows that’s not true. According to USDA, 37 percent of the corn supply is used in producing ethanol. But the value of the corn does not simply vanish when ethanol is produced. One-third of the corn re-enters the market as a high value animal feed called dried distillers grains.

When the distillers’ grains are factored in, 43 percent of the corn supply is available for animal feed. Only 28 percent is used for ethanol.

This is the inconvenient truth for ethanol detractors. They prefer to live in a bubble where they believe that ethanol is diverting corn from livestock use. That’s just not the case.

Mr. Pope also proclaims, “Ironically, if the ethanol mandate did not exist, even this year’s drought-depleted corn crop would have been more than enough to meet the requirements for livestock feed and food production at decent prices.”

I’d like to ask Mr. Pope, why do you think that is? Why did farmers plant 96 million acres of corn this year? Why have seed producers spent millions to develop better yielding and drought resistant traits? The answer is simple: ethanol.

If not for ethanol, farmers wouldn’t have planted 96 million acres of corn this year. Without ethanol, I doubt we’d have seen investment in higher yielding and more drought tolerant corn plants.

It’s easy to understand Smithfield’s motive. They benefit from an abundant supply of corn, just not the competing demand for it. What is Smithfield’s primary problem? Again, the answer is simple: cost and profit. They still want to pay $2 for a bushel of corn.

This is an important point that I hope people understand. For nearly 30 years, until about 2005, companies like Smithfield had the luxury of buying corn below the cost of production. Corn prices remained at about $1.50 to $3.00 a bushel for nearly 30 years. Farmers routinely lost money.

The federal government then provided economic support for the farmers. Producers like Smithfield had the best of both worlds. They were able to buy corn below the cost of production, and let the federal government subsidize their business by guaranteeing a cheap supply of corn.

In the view of corporate livestock producers, subsidies are just fine if they allow them to buy corn below the cost of production. Anybody could look like a genius with that business model.

Repealing the Renewable Fuels standard won’t bolster Smithfield’s profits. Because of the flexibility built into the renewable fuels mandate, a waiver won’t significantly reduce corn prices.

The drought is enormous in both scale and severity. But we won’t know the true impact until September, when the harvest begins. The latest estimates from USDA indicate an average yield of 146 bushels per acre. That would result in a harvest of 13 billion bushels. This would still be one of the largest corn harvests.

I would suggest that those claiming the sky is falling withhold their call for waiving or repealing the Renewable Fuels Standard. It’s a premature action that will not produce the desired result. And it would increase our dependence on foreign oil and drive up prices at the pump for consumers.

(14) comments

sludgefund
sludgefund

Hemp is an excellent renewable fuel source that we are forbidden to even consider because of the DEA

Congress Morons

Seriously, why does anyone believe anything that comes out of the mouth of a politician? Their only goal is to be re-elected. And to be re-elected they have to buy votes by giving people things. They never have the best interest of the nation at heart...that would surely not get them re-elected. The other problem with any politician is that they are never held accountable for their mistakes. We need term limits for representatives and senators. We need to end the career politician! I believe Mr. Pope will be held accountable while Mr. Grassley never will and what gives GrASSley the right to speak about a private citizen the way he did about Mr. Pope?

WesB

The hardest part is the removal of the water from the ethanol. I think another crop should be used personally - I heard there was some work on putting sugar producing genes into a line of switch grass that produce grass with higher energy yield. In places where the environment can support it, sugar cane or beets are another good option to grain. The biggest problem with corn and such is the sugar is started as carbohydrates - i.e. long chain form of sugar. You have to put the energy and/or a mix of specialized enzymes in to break these down to a large portion. Corn is not a good solution. Since the main problem is consumption rate, a far better solution would be a slowly increasing tax that would raise the price of gas over time. It would cause reduced usage and increased efficiency of the use that continued. Far too simple a solution though.

davenportchick

Grassley, you go read Consumer's report magazine article on ethanol, get educated ok? This gas is garbage. Then you come on over and drive my 92' Honda Accord filled with ethanol and see how long before the car dies in mid traffic. That's what happened the 2 STUPID times I thought I would save the 10 cents a gallon way before reading this article. This needs to be banned. Are you that dense where you don't realize this is the reason why our food prices are also so high? Ethanol breaks down the rubber components in your vehicle, and also ruins engines, many snow blowers, lawnmowers, chain saws, etc. state right in the book "Do not use Ethanol". Gee I wonder why? It also costs more to produce Ethanol than regular unleaded gas, and the mpg is considerably less than regular unleaded gas. So that 10 cents less per gallon you people are paying for garbage gas, you are also being sold a bill of goods!

Ag-Lender

Drove a '93 Accord to nearly 200K. Used the ethanol blend everytime. Never had a problem and got over 30 MPG. Many small engine products are designed to run on E10. The by product of ethanol (DDGs) go right back into the food supply via cattle. Many of your points are now proven false.

banned123

Why aren't switchgrass or sugar cane options being explored? Switchgrass is easy to grow, it could be grown along side of highways even if you wanted to. It makes just as good of ethanol, and it doesn't affect the food prices.

senor citizen

The lack of a good corn crop in 2012 will affect world food prices yet this year. I only hope Mexico and Brasil will be able to take up some of the slack. Rice is a very important crop and Louisiana and Florida supply much of Americas. I hope people will be able to afford American grains in the western hemisphere. If not Central and South America will have to buy from Asia. I have no answer, but it looks like a diasater on the way.

Wasteline

Senator Grassley should also comment on the shortage and price rise of distiller grains due to ethanol plants shutting down or reducing production of ethanol.

Wheezy
Wheezy

This weekend Grassley is attending the "Family Leadership Summit', sponsored by a group led by Bob Vander Plaats, the good "Christian" homophobe who led the charge to remove Supreme Court judges for not voting to repeal the gay marriage law (a unanimous, bipartisan vote).

Wheezy
Wheezy

Chuck gets a little snarky when his own pet subsidies are challenged

Wasteline

Dependence on foreign oil can be impacted by moving trucks to the abundant and clean burning "Natural Gas".
This is more important going forward, now that the drought has emphasized the vulnerability of corn based ethanol.

davenportchick

Boo-hoo. Greedy ethanol corn growing farmers just for this junk are the reason why our food prices are so high. Ban this junk gas. And it's time to bring corn back down to a resonable price so that we can afford to eat again.

Ag-Lender

How are corn farmers greedy?? Based on your logic, are you greedy for wanting cheap food and for the farmer to operate at a loss??

Wasteline

COLUMN-Corn, oil divergence spells disaster for US ethanol: Campbell

"...ethanol producers are squeezed on both ends. Soaring corn
boosts costs, while soaring ethanol prices shrink their market."

"Poor profitability has already prompted producers to reduce
output. US ethanol production fell to 821,000 barrels per day last week"

http://articles.chicagotribune.com/2012-07-12/news/sns-rt-column-campbellethanoll2e8ic97g-20120712_1_ethanol-prices-ethanol-producers-ethanol-sector

The grain harvest of 2012 will play out in 2013. What will Senator Grassley say if there's another poor harvest in 2013?

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