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AdvertisementSwitchgrass to ethanol, will the day ever come?The only thing worse than having a person against you who doesn't know what he's talking about is having a person who is for you who doesn't know what he is talking about. Do you recall former President George W. Bush giving the State of the Union speech in 2006 and calling for cellulosic ethanol to be made from switchgrass? At that time, the first generation of large processing and distillation plants were online and making ethanol from corn. The financial future looked incredibly good for the owners of facilities that were completed after 2001. Ethanol was an American fuel made from a renewable resource that added oxygen to gasoline while raising the octane rating. Everyone loved it except Californians and everything seemed perfect until the demand for corn caused the price to go up and caught the livestock industry flat-footed. As more production was added, ethanol profits waned until Congress passed the Renewable Fuels Standard (RFS) that guaranteed demand for billions of gallons annually. The president argued that biofuels were a way to insure a domestic fuel supply that could reduce dependence on imported oil. It made good sense until he took the word of research scientists who said we could make the ethanol from grasses, bark and other cellulosic waste materials. The researchers weren't wrong but the question was: "when" and the answer is: "still to be determined." The public was led to believe that, on the short-term horizon, ethanol derived from cellulose would be cheap and abundant. That hasn't happened and may not happen. What happened is that "corn wars" have raged for the past four years. Livestock producers, who have historically had the grain as an economical feedstock, are pitted against corn producers, who are getting twice the price they've ever seen. The farmers feel as much victims of the abrupt change in demand as the livestock sector and are planting as many acres as possible to extract the highest yield that genetics, fertilization and Mother Nature will allow. The social and economic upheaval caused by the run-up in corn prices will be told for generations. The ethanol industry suffered a major disruption in 2008 when caught by a corn price spike caused due to summer flooding in the Corn Belt. "They forgot they were in the grain business," said one industry observer as lifting of hedges resulted in owning a great deal of very high-priced grain. Bankruptcy of large and small plants occurred and now a number of nearly new facilities have been purchased for 30 percent of their construction cost and are in the hands of Valero, the nation's largest petroleum refiner. Several more are owned by the lenders and have an uncertain future. The common belief in the industry has been that corn would be the first generation feedstock for ethanol production and raw cellulose would be the second. The scientists are working feverishly to find ways to break down the plants and extract the sugars but economists are projecting that the first year of substantial production from cellulose will be 2015. To put that in perspective, the ethanol industry is scheduled to lose its subsidies after 2012 with a declining blenders' credit and a lower import duty on product coming in from Central and South America. It is becoming painfully obvious that the timeline is ahead of the real world. There is no guarantee that cellulosic ethanol will ever be as economical as corn-based ethanol. Efficiencies within the production system and higher yields of grain are already trending the cost per gallon downward. No breakthrough technology has yet been discovered that will bring switchgrass in the front door and send ethanol out the back. A corncob conversion system (Poet-Emmettsburg) is being scaled up in northwest Iowa but the first production is not expected until 2011. The government created the ethanol industry and may be its salvation. The importance and investment may be like several other industries: simply too big to be allowed to fail. Keeping subsidies in place and blocking imports until 2020 could give enough time to find ways to make cellulosic production cost competitive. For the livestock producer, and those who have counted on corn as a food and not a fuel, the picture may be not all gloom and doom. The cost of inputs appears to be stabilizing, albeit at a much higher level. The shakeout of dairy, poultry, beef cattle and hog producers is in its final phase and the resulting downtrend in production will bring prices up. The length of the recession remains a wild card as does the price of oil. No matter what happens in the general economy, livestock producers, who survive, will be cautious in their expansion in the years ahead. President Bush (2000-2008) may be judged kindly by history as he could be credited with starting the modern ethanol industry. He may be right in his prediction that grass can be made into fuel (they are now burning switchgrass to generate electricity). He and other presidents have predicted hydrogen powered cars within the next 20 years and that hydrogen may be derived from ethanol. Editor's Note: This is Ken Root's 35th year as an agricultural reporter. He grew up on a small farm in central Oklahoma and started his career as a vocational agriculture teacher. He worked in Oklahoma, Kansas and Missouri as a broadcaster and was the original host of AgriTalk. He has also been the executive director of the National AgriChemical Retailers Association in Washington, D.C. and the National Association of Farm Broadcasters in Kansas City. Ken is now the lead farm broadcaster at WHO and WMT Radio based in Des Moines, Iowa. He has been a columnist for HPJ and Midwest Ag Journal for eight years.
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