26 September 2013

When livestock farmers and grocery manufacturers mobilise against ethanol in the USA

Until now, agrofuels and in particular ethanol were usually criticised by environmental or anti-hunger NGOs. From now on, criticisms made by livestock farmers and grocery manufacturers (mainly soft drinks producers) will also matter. This is what is already occurring in the USA.

It may be the case that these powerful lobbies will have better chances to change the policy of support to agrofuels implemented by the USA. Maybe these criticisms will also be taken up by livestock farmers and industrialists in Europe and that they will help modify even more the European Union policy on agrofuels, even though it has already given some signs of change.

Evidently, these criticisms by livestock farmers and agroprocessors did not arise from some increased consciousness of the negative effect the production of ethanol has on forests, green house gasses emission, hunger or even the US government budget and the pockets of the US taxpayers. No, this is more a matter for these groups to defend their own interests.

Livestock farmers fear that, as the share of maize production going to ethanol production is very high, this will contribute to increase maize market volatility. According to the association of maize producers, the quantity of maize used for manufacturing ethanol in the USA grew from 630 million bushel (approximately 16 million tonnes) in 2000 to 4.9 billion bushels (123 million tonnes) in 2012. This amount is to be compared with the total US maize production of 274 million tonnes. Livestock farmers and agroprocessors fear that in case of a climatic event (drought or flood) maize production would drop and the price of maize would soar, leaving only to the farmers the option of reducing their herd by selling quickly their animals at a considerable financial loss. This is precisely the kind of situation that is looming ahead. Indeed, estimates are that the recent floods in the Midwest and drought in the Southern plains of the US may bring a fall in maize stocks to a level equivalent to 20 days of consumption, while it is generally admitted that a healthy level is more around 30 days of stocks. There seems therefore to be soon a risk of tension on the maize market...

It must be recalled here that agrofuels production is strongly encouraged as it is being subsidised in the US and the European Union (more than USD 10 billion in 2012) with the view to boost its production:

1. •Many experts believe that the increase of ethanol production from maize has contributed to soaring food prices in 2007/08. Indeed, they have observed that out of the additional 40 million tonnes of demand for maize in 2007/08, almost 30 million tonnes were absorbed by the ethanol factories in the US alone [read more on food crises here]
   

2. •The 2005 US law envisages an annual production of 28 billion litres of agrofuels in 2012, and this production, in the 2007 law, has been projected to reach 136 billion litres in 2022
   

3. •The European Union has fixed an objective for agrofuels to reach 10% of terrestrial transport requirements in 2020 (this proportion is currently 4.5%). In 2008, the European Union produced 13 million tonnes of agrofuels (diesel and ethanol) equivalent to 17 billion litres. On 11 September 2013, the European Parliament decided to fix the ceiling for agrofuels of the first generation (produced from food products) at 6% of the energy consumed in terrestrial transport, and fixed an objective of 2.5% for agrofuels of the second generation produced from agriculture and forestry by-products, and microalgae.
   

The pressure exerted by various anti-agrofuel groups seems therefore to have an effect, at least in Europe for the moment.

Will the US follow this movement under the new pressure of livestock farmers and soft drink corporations?

This would certainly be a very encouraging change.

Last update:    September 2013

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