Food fight?

LIMA - Every day, 16 rail cars' worth of corn is needed for ethanol production at Greater Ohio Ethanol.

All that corn shifted to ethanol away from feed and food must be the reason for higher grocery bills at home and global food insecurity abroad, right?

The answers to questions of food, feed and fuel are more complicated than that. New information shows ethanol production plays only a small role in increasing food prices. Ethanol production in the region and many plants in the country results in a byproduct - high-quality feed for livestock - and a second lucrative stream of revenue. Corn as the raw material used to make ethanol is most likely a stepping stone to other more efficient feedstocks produced by technology that gets greener every day.

Ethanol's byproduct

At a July ceremony, the city received an award from the federal government for its use of an economic development grant for Greater Ohio Ethanol's public infrastructure needs. Drowning out the speeches, a 24-7 process hummed and cranked, producing what is called distiller's dried grains. The high-fiber, high-protein byproduct of making ethanol is used and sold as livestock feed.

The massive golden pile, all on its own, answered the question of "or" with "and" in the middle of food, fuel. It's going to hogs, chicken and cattle, but its importance to the ethanol industry is in the purse, not the stomach.

POET in Leipsic and Go Ethanol in Lima, Ohio's first two ethanol plants, both make the byproduct, POET under a brand name of Dakota Gold.

The second revenue stream is "critical," said David Gillespie, business development manager for Greater Ohio.

"You can almost equate it to a convenience store. It doesn't make any money selling gas - a penny here, a penny there. The margins are slim. They make their money on selling candy, Cokes to the consumer," Gillespie said. "You sell ethanol to cover your costs. Your DDG is your revenue and your profit margin."

Greater Ohio, a $150 million plant with 40 employees and a $2.75 million annual payroll, is producing about 54 million gallons of ethanol a year. A typical ethanol plant receives about 19 cents a gallon for its primary product, according to an April study completed by Texas A&M University's Agriculture and Food Policy Center. At that rate, the plant is making about $10.3 million on its ethanol.

At Greater Ohio, the plant also produces about 192,000 tons of DDG. Plants are receiving nearly $200 a ton for the product, according to the A&M study, bringing another $38 million.

Corn prices, food prices

U.S. ethanol production from corn has boomed in a short couple of decades: In 1980, the country produced 175 million gallons, then 900 million gallons in 1990 and 6.5 billion gallons in 2007. The production has been spurred in part by government subsidies, 51 cents a gallon currently to the companies that blend ethanol into gasoline, and mandates to include certain percentages of ethanol in the nation's fuel supply. That meteoric rise was followed by a rise in recent years of corn prices (from $2 a bushel in 2005 to $3.40 in 2007 to $8 earlier this year followed by a drop this month to $5.50, according to the federal government and National Corn Growers Association) and more recent rise in food prices.

Only a tiny percentage of corn grown in this country is for direct human consumption, said Randall Reeder, agricultural engineer with the Ohio State University Extension.

While the livestock industry, as the chief buyer of corn for feed, has borne the cost of higher corn prices, the price isn't exclusively because of ethanol production.

"It's simple to try and equate high corn prices with an ethanol gold rush," Gillespie said. "It's complicated to understand the reality, which is the rising price of oil and the weak dollar, which directly relates to high commodity prices because they're traded in U.S. dollars. Those are the real issues."

Weather and resulting yields from the acres planted also play a large role in the price of corn and every other crop, Reeder said.

"Hardin County farmers were a month behind this spring. With the cool, wet weather, farmers couldn't plant. If they get a killing frost before Nov. 1, there will be a lot of corn lost," Reeder said. "Weather is always a big issue with that."

Corn is also a global commodity, but U.S. ethanol production is affecting the world food issue by less than 3 percent, Reeder said.

"I'm sure the price of oil is a bigger factor than the price of corn," Reeder said.

Texas Gov. Rick Perry most recently brought up the question again when he asked the federal government to reduce its mandate of ethanol in the fuel supply. The U.S. Environmental Protection Agency said no earlier this month, but before that, Perry asked Texas A&M for a study on the issue. The mandate, Perry said, is propping up the high cost of corn.

Cattle farmers are bearing the brunt of high corn prices, the study said, adding that the underlying force driving changes in agriculture and the entire economy is the price of oil and that corn prices have had little to do with rising food costs.

Stepping stone

The Energy Independence and Security Act of 2007 requires the use of 36 billion gallons of renewable transportation fuel in the United States by 2022. Of that, 16 billion gallons must be cellulosic (plant mass) biofuels, and ethanol from corn is capped at 15 billion gallons.

That means corn is a stepping stone.

Ethanol can be made of darn near anything. The U.S. Energy Department believes the country can grow adequate crops for feedstock to displace about 30 percent of current gasoline consumption on a sustainable basis by 2030. Material such as switchgrass, the leaves and stalks of corn and woodchips, among others, could be used.

In Leipsic, they're making 60 million gallons of ethanol a year. POET, the largest ethanol producer in the world, will open two new Ohio plants in Marion and Fostoria at the end of the year, Leipsic General Manager Mark Borer said.

POET recognizes corn won't always be the answer, Borer said, and designs plants with that in mind.

"Corn is a stepping stone," Borer said. "It's permitting us to develop new technology. But I don't see corn going away."

POET works on technology in three ways:

• Increasing crop yields and lowering costs.

• Replacing carbon-based fuels to power plants.

• Developing new crop material to supplement corn as a feedstock.

"We've got a plant in Iowa working on replacing half its fuel with a woodchip boiler and the other half with methane from a landfill," Borer said. "We have a federal grant to help fund research on using corn cobs."

No one envisions ethanol as the answer, but many people see ethanol production as an answer.

"If we used 100 percent of our corn for fuel and 100 percent of our soybeans for diesel, that would still be a lower percentage of total fuel used in this country," Reeder said. "Nobody is saying we can grow all of our gasoline. That's not the way we'll be driving automobiles 200 years from now."