Wednesday - July 16, 2014

Pork Fight!!

An ethanol plant in Nebraska corn country is pumping out fuel made from sugar beets, and corn farmers are suing to stop it – a small-town dispute that offers an unusual take on the debate over the market-distorting impact of sugar and corn subsidies.

The dispute in Aurora, population about 4,400, brings into conflict two of the largest U.S. farm programs, one promoting sugar production and the other corn-based ethanol. Aventine Renewable Energy Holdings Inc, a privately held Illinois firm, is reaping profits producing ethanol with cheap sugar, thanks to a U.S. Agriculture Department subsidy of beet sugar.

Local corn farmers, who benefit from a government rule that forces oil companies to blend ethanol into gasoline, say in court documents that Aventine’s action violates an agreement to use their grain exclusively as a feedstock for the firm’s recently reopened plant in Aurora. Aventine denies any wrongdoing, saying it has abided by its contract.

The irony of the situation is not lost on George Hohwieler, president and chief executive of the Aurora Cooperative Elevator Co. that is at loggerheads with Aventine.

“Hamilton County, Nebraska, by any measure is one of the most productive corn-producing counties in the world,” he said. “The message being sent to the marketplace is that they’re making ethanol out of sugar.”

In fact, Aventine’s use of beet sugar is the first large-scale production of sugar alcohol in Nebraska since bootleggers used boxcars of sugar to make moonshine during Prohibition in the 1920s and 1930s.

Aventine chief executive Mark Beemer said the farmers’ coop was being short sighted in suing the company. “We’ve been very blunt. This is just a very short-term pathway to get the plant open and then convert back to corn ethanol,” he said.

The rare intersection of the two farm programs in Aurora illustrates the unintended impact federal farm subsidies can have on market activity.

One such initiative, the Feedstock Flexibility Program, last year enabled buyers like Aventine to purchase below-market sugar at government auctions, then use it as feedstocks in their ethanol plants, putting the sugar in competition with corn.

Under the federal sugar program, the government guarantees minimum prices for sugar loans, paying processors 24 cents per lb for beet sugar, or 19 cents for cane sugar, if sugar prices fall below those benchmarks. The USDA then must auction the sugar for non-food purposes.

Aventine was the biggest buyer at USDA auctions last fall, purchasing some 660 million pounds of beet sugar.

Beemer said the firm earned up to 50 cents a gallon on each of the 80,000 gallons it churned out daily while burning beet sugar. If the supplies last through August, as expected, that could amount to a nearly $4 million profit for Aventine, according to a Reuters calculation.

Beemer declined to comment on the profitability of the Aurora operation.

I think it’s time to not only end this stupid ethanol program but to end price supports for just about all farm products. If we’ve got enough shale oil and gas these days to make the stuff into motor oil, then we ought to have plenty enough to make gasoline. Not to mention that everyone’s cars run better and get better mileage on pure gasoline. Or the infrastructure impact that corrosive ethanol is having. Or that the idiotic ethanol subsidy has caused a MASSIVE spike in food prices across the planet.

Stupid is as stupid does, and this program has been known to be a total loser since the very beginning. DUMP IT.

But now it’s even worse. When I see one kind of greedy grower fighting another kind of greedy grower for a bigger slice of needless government pork, egged on by another government program that not only supports prices and stifles free market trading and another that subsidizes wasting food, I want to chew lead and spit bullets. Well I would, but the EPA has forced all the lead mines to close here. We’ve got centuries worth, but we can’t mine or process any of it any longer. Thanks EPA. And don’t get me going on the whole coal fiasco either.

NO ethanol subsidy. NO price support for sugar. NO Sugar Act to eliminate international competition. NO forced below market price sales of perfectly fine but temporarily excess sugar. NONE OF IT. Greedy bastiges.

Posted by Drew458     on 07/16/2014 at 10:10 AM   
Filed Under: • Economics • Government • Oil, Alternative Energy, and Gas Prices •  
• Comments (2) • Trackbacks(0)  Permalink •  

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