Referring to the nation’s priority to reduce foreign energy dependence, Thomas Dorr, USDA Under Secretary of Rural Development says, “Unless we fully address the energy price structure that’s impacting agriculture at the same time we address the corn and protein price structure it’s an incomplete approach.” Dorr says that the current price pressure on corn is not solely the result of ethanol production, but also the world’s desire for better dietary standards and record corn exports.
“The overall increase in food prices is about 4.5 percent and, at most, 10 percent of that increase is being driven by ethanol. The component that is really driving the (corn and food price) increase is the high cost of energy,” Dorr says.
Dorr views the 45 cent blender credit as essentially a subsidy to ramp up the industry for alternative liquid fuels. “With corn-based ethanol production, we have proved there is a market for large quantities of ethanol which, in turn, gives more reason to look at cellulosic ethanol production,” he says. “We have to build out the cellulosic ethanol industry in this country. We know that.”
In addition, Dorr says removal of the ethanol production mandate currently in place will not substantively reduce the price of corn. “According to an Iowa State University study, with oil keeping at current price levels, the reduction of the mandate will have minimal impact on the price of corn. The stark reality is that we are adjusting the price of corn upward,” Dorr says. “We’re going to see cattle and pork prices substantively higher than what they are today.”