Missouri farmers could soon be standing in tall cotton thanks to an amendment to a federal energy bill passed last week by the Senate Energy Committee.
The amendment, co-sponsored by Sen. Jim Talent, R-Mo., calls for an increase in the use of corn-based ethanol in gasoline and increased use of other renewable fuels beginning next year.
“The bill sets the standard for the future use of fuel additives,” said Talent spokesman Rich Chrismer.
Such fuels include those partially generated from agricultural products such as corn and soybeans, which are harvested and refined at local plants into corn-based ethanol or soybean-based biodiesel. The legislation calls for refiners to increase the amount of renewable components in motor fuels from 4 billion gallons in 2006 to 8 billion gallons annually by 2012.
While the news is positive for Missouri farmers coming off booming years for corn and soybean yields, and where 57 percent of planted acreage is dedicated to those crops this year, the legislation faces some challenges. Pat Westhoff, an associate professor of agro-economics at MU’s Food and Agricultural Policy Research Institute, said the clout of the oil lobby and the contentious debate about waivers allowing the use of older fuel additives such as methyl tertiary butyl ether, or MTBE, might erode support for the legislation.
“The ethanol-specific question is: If there’s going to be a mandate, how big should the mandate be?” Westhoff said.
The oil industry would prefer to keep the legislated figure closer to the 5 billion-gallon goal contained in the House version of the bill. Last year, ethanol production reached 3.4 billion gallons, making the House’s lower mandate appealing.
Politicking aside, it’s difficult to assess the potential impact on Missouri farmers and ethanol plants.
In the past 10 years alone, the number of bushels of corn dedicated to ethanol production has jumped from 429 million to more than 1.4 billion bushels last year.
Westhoff characterized the situation as a contrast between the short-term and long-term when it comes to ethanol production.
“In the near term, it is only a marginal effect in the next couple of years,” Westhoff said.
“The ethanol that’s going to be produced is coming from plants already constructed.”
As farmers find it increasingly difficult to sell their product in traditional markets, such as local granary distributors, investing in ethanol plants has become an attractive alternative.
Cooperatives owned by Midwestern farmers now control almost 50 percent of regional ethanol production, spurred by state tax incentives and federal
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subsidies. Mid-Missouri Energy, based in Malta Bend, is owned by 700 farmers and opened the state’s fourth plant, in Carrollton, in February.
Billy Gwaltney, general manager of Mid-Missouri Energy, agreed the legislation would have little impact in the short term but said it signaled a long-term dedication to renewable fuels.
“It is only one of many things indicating there is going to be a growing supply,” Gwaltney said.
Westhoff said projections for the coming year indicated slightly less production than expected, indicating that production rates for plants would shrink slightly. That doesn’t mean demand or supply has dwindled. Rather, some plants will not be going full-bore with their refinement.
“We have some plants that are operating at greater than their stated capacity,” Westhoff said, predicting that the trend will slow.
The viability of meeting the 8 billion-gallon mandate rests in large part on dispelling what Gwaltney considers myths about ethanol, namely that it is no more environmentally sound than ordinary petroleum products.
“The fact that MTBE has been banned as a fuel additive in 20 states is evidence enough that petroleum-based gasoline is not as clean as blended fuels,” Gwaltney said.
The bill next makes its way to the Senate floor after being passed out of the committee Friday.
Westhoff expects the bill will meet dogged debate in the full Senate before being approved. He fears that it could become stymied in a conference committee intended to iron out differences in the bill.