Nebraska Senator Ben Nelson has introduced what he calls “groundbreaking legislation that offers tax breaks and guaranteed loans for small business for the development of bio-gas derived from animal waste.”
 

Biogas, a natural gas substitute that is created by the anaerobic digestion (AD) of animal wastes, is composed of at least 60%  methane, the principal ingredient in natural gas.  Biogas can be used as is on the farm, co-located with an ethanol plant, and cleaned up to be used as a renewable substitute for natural gas, propane, or other fossil fuels.  Nelson acknowledges that the technology to break down animal wastes to create bio-gas already exists and that it needs encouragement from the federal government to become a commercially-viable alternative to natural gas.
 

The bill, the Biogas Production Incentives Act of 2007, would encourage greater production of biogas for energy purposes by doing a number of things and would provide bio-gas producers with a tax credit of $4.27 for every mmBtu of biogas produced.
 

Biogas production also offers environmental benefits such as a reduction in the greenhouse gas emissions of both carbon dioxide and methane, as well as improved water quality through better manure management.
 

Sen. Nelson says the bill “would provide loans, loan guarantees and/or grants for the multi-farm collection and transportation of qualified energy feedstock from smaller livestock operations to a qualified facility, or for the purchase or construction of equipment or facilities for collection and transportation,” as well as creating a counter-cyclical safety net for biogas producers by providing payment from Commodity Credit Corporation funds to qualified biogas producers only when the annual average daily prices of natural gas falls below a certain level.
 

“We’ve made great strides in developing an ethanol industry in Nebraska and we should do more to diversify and expand our production of bio-fuels and renewable energy. My legislation will put into place tax incentives and financial support for large scale and small scale producers to get involved in biogas production and help America win the battle for energy independence.”

According to preliminary data from the federal Energy Information Administration, monthly ethanol imports to the U.S. fell 8.4% to 939,000 barrels in February, the lowest level seen since last May.

February ethanol imports averaged 31,300 barrels a day, down from 33,000 barrels a day in January.

Last May, U.S. fuel marketers were beginning to ramp up their use of the plant-derived gasoline additive.  Refiners greatly increased their ethanol use because a federal mandate for its use began and because gasoline manufacturers were ending their use of the petroleum-based additive methyl tertiary butyl ether.  Refiners greatly increased their ethanol use after a federal law was passed mandating its use.  Imports of 681,000 barrels in May, 2006 more than doubled by June and hit a peak of 3.203 million barrels in August before easing to 1.191 million barrels in January, 2007.

Most of the volume - 10 out of 14 shipments - was bound for ports in New Jersey. Three shipments went to Hawaii and one shipment of 1,000 barrels from Canada went to North Dakota. Four shipments totaling 572,000 barrels sailed from Brazil and six, totaling 212,000 barrels, came from El Salvador. Two ships came from Jamaica and the last sailed from Trinidad.

 
The number of ships is close to the Williams shipping agency’s estimate issued in late March. The Brazilian agency said 18 ships were loading ethanol in February.  Williams’ estimate for April loadings is higher, at 22 ships.

The USDA reported last week that the ethanol industry’s corn demand is raising livestock costs and will result in increased beef, pork and chicken prices.

The USDA also reports that ethanol is consuming 20% of last year’s corn crop and is expected to use 25% of this year’s harvest, driving up the price of corn. The average price of corn is $3.20 a bushel, which is $2 up from last year.

Higher feed costs will reduce meat and poultry production. The National Chicken Council reported that the price of corn has forced a 40% increase in the cost of feeding chickens, and poultry will soon cost more at retail.

Deputy Agriculture Secretary Chuck Conner said USDA is closely monitoring corn supply and demand, which is likely to force farmers to plant more acres of the crop: “We do have confidence in the marketplace’s ability to react.  We believe producers are seeing the market saying, ‘I need more corn, not only for ethanol, but for our feed needs in this country.”

The USDA announced that a mere 4.1 million acres will be withdrawn from the Conservation Reserve Program in the next four years, ruling out the possibility that it be used for extra corn production.  The CRP program pays landowners to take out of production land that is highly erodible or otherwise environmentally sensitive.

Meanwhile, USDA — urged by NCC, the National Pork Producers Council, American Meat Institute, National Turkey Federation, National Cattlemen’s Beef Association, and National Milk Producers Federation — has formed an ethanol panel to address the effects of ethanol and other biofuels on animal agriculture.

The Dairy and Poultry subcommittee of the House Agriculture Committee warned yesterday that consumer food prices will rise if the burden of expensive corn is not ameliorated.

 
J. Patrick Boyle, president and CEO of the American Meat Institute, said that Congress should take practical actions to moderate the impact that the nation’s renewable energy policy is having on animal feed costs and the cost of food sold to consumers, and Tyson Foods’ Matthew Herman spoke on behalf of the National Chicken Council, telling the subcommittee that the United States could see a corn shortage as ethanol demand outstrips supply.

In an effort to alleviate price pressure on corn producers, the two groups groups suggested that Congress 1) increase federal investment in dried distiller grain research that could help producers adjust feeding regimens to include distiller grains, 2) allow the U.S. ethanol tariff to expire as scheduled on Dec. 31, 2008 so that Americans have greater access to imported ethanol, and finally, 3) promote alternative energy sourced from cellulosic materials, methane, or renewable diesel.

 
Herman and the National Chicken Council also asked Congress to 1) permit non-environmentally sensitive cropland to be released from USDA’s Conservation Reserve Program without penalty or loss of program benefits, and 2) allow new cropland into the program if it is designated for bio-energy production. AMI’s Boyle suggested a working lands conservation program to encourage production of environmentally friendly feedstuffs.

Brazil President Luiz Inacio Lula da Silva said yesterday that he will push President Bush to reduce the United States’ $0.54/gallon ethanol import tariffs at a meeting later this week in Sao Paulo, where the two presidents are expected to sign an accord to spread the use of ethanol in the region during the visit. 

 
“High tariffs placed by the U.S. on Brazilian ethanol make no sense,” Lula said during his biweekly radio program.  “I think that we are close to an accord (in the Doha round) which could favor agricultural nations - principally those that don’t have the chance to compete globally,” said Lula, who also added that Bush is key to progress in the talks.

 
Sergio Gabrielli, the chief executive of Brazil’s state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, said yesterday his company won’t export ethanol to the U.S. if the import tariff remains in place: “The U.S. has the world’s biggest ethanol production and its biggest gasoline consumption…But it’s practically impossible to do business in ethanol with the currently existing tariff.”  Petrobras produces ethanol and also sells it domestically and to Venezuela and Nigeria; Petrobas is also in talks about major ethanol exports to Japan.

Energy Information Administrator Guy Caruso said yesterday that ethanol supply is expected to be more “robust,” and the ethanol market will be “softer” this driving season than last year.  He added that he expects ethanol prices to be “more of what we’ve known to be normal.”

 
Last summer, the ethanol industry was pressed to produce enough ethanol to adequately replace the use of another gasoline additive found to contaminate groundwater. The phase-in of ethanol in gasoline was partly blamed for high gasoline prices, which sat above $3 a gallon in many parts of the country last spring and summer.

President George Bush said yesterday that the key to keeping U.S. cattle and hog farmers from feeling the pinch from rising feed-corn prices is a breakthrough in cellulosic ethanol production technology.

Critics of the President’s energy policy say that Bush’s strategu of offsetting 35 billion gallons of gasoline use a year by 2017 with alternative fuels such as ethanol is unrealistic and could make feed-corn prices significantly more expensive.

Nonetheless, President Bush said he was confident in his goal, but it would require continued government funding. Cellulosic ethanol “is coming to fruition, and the role of the government is to stimulate thought and investment.” 

The Bush administration has asked Congress for up to $4 billion in loans guarantees for biofuel projects, which would include plans to build biorefineries and cellulosic ethanol plants, which produce motor fuel from biomass such as wood chips, switchgrass, and corn stover.

The President says his 35 billion gallon goal is supposed to help cut U.S. dependence on foreign crude supplies and address climate change through cleaner-fuel. The Administration is aiming that 20 billion gallons will come from cellulosic ethanol, with only around 15 billion gallons likely to be supplied through corn-based ethanol due to market constraints.

Presently, however, it’s technically unfeasible to produce cellulosic ethanol commercially because of the high cost of enzymes that break down the corn starch into sugar for fermentation, and some energy analysts wonder if a breakthrough is possible within the timeline set by Bush.

“I know it sounds like a pipe dream to some…(but) we’re on the verge of some breakthroughs that will enable a pile of woodchips to become the raw materials for fuels that will be able to run your car” he added.  If cellulosic ethanol doesn’t become commercially viable in time, the Buch administration is hoping to use coal-to-liquid production, another alternative fuel, to help meet the 35 billion gallon goal.

Michael Yost, the head of the U.S. foreign agriculture service, said African and U.S. farmers both stood to profit from the growing demand for grains that can be converted to ethanol or biodiesel, two clean burning substitutes for gasoline and normal diesel fuel.

 
“The advent of renewable energy is global,” he said in an interview. “I think it could be the biggest paradigm shift we have seen in a long, long time in agriculture.”

 
Kenya’s minister for trade, Mukhisa Kituyi, told the U.S.-East Africa Region Agribusiness Trade and Investment Mission conference that African governments recognize that agriculture is their strongest industry and that Africa wanted to move from producing raw materials to processed goods.

 
Kituya also said the economics and politics of global trade in cereals has been turned upside down by the rising price of oil, global warming, and new interest in biofuels produced from grain. “The fact that there is now an insatiable market in converting cereals into biodiesel not only escalates the prices of cereals around the world, but threatens to take food out of vulnerable mouths,” he said. “A new opportunity has been created.” He said if managed properly, African farmers could see a greater market for their goods and less competition from farmers in developing countries.

 
U.S. and European leaders are concerned about global climate change and dependence on Middle East oil, and have set high targets for increasing the use of biofuels. Some experts question whether farmers in those regions can meet the demand, possibly creating a market for African farmers.

 
Yost said in less than a year, the U.S. government has been able to drop all trade-distorting subsidies for grains and oil seeds because of the increased demand for biofuels. “We’ve had discussion today with different African agribusiness’ and they are looking for technology, they are looking for know-how,” he said. “With the rising demand for renewable energy, I see it raising prices and raising interest, raising the investment potential around the world, everywhere.”

Increased ethanol production and President Bush’s push for a greater emphasis on renewable energy sources seems to be the cause of some controversy in the poultry industry.  Speaking at the National Turkey Federation’s annual convention in Tucson yesterday, Samantha Slater, director of congressional and regulatory affairs with the RFA, discussed the pros of ethanol before an audience confronted with ever-rising corn prices.

Though the poultry industry faces corn prices of about $4 per bushel, Slater said the grain-based ethanol industry is paying far less for product. “about $2.20 to $3 a bushel, though the spot price is much higher.”

More than 100 grain-based ethanol plants are “on the line” today, Slater said, with 77 more under construction to meet growing U.S. demand for the fuel source.  In all, some 4.9 billion gallons of ethanol were produced in the United States last year against demand of about 6 billion gallons, Slater said. The remainder was imported from Brazil.

Economist Tom Elam, president of FarmEcon.com, said it will be difficult to seamlessly integrate ethanol into the U.S. economy. “An 8-million to 10-million acre increase in corn will drop prices, but cause soybean meal prices to rise” owing to corresponding declines in soy acreage, and at a time when McDonalds Corp. is looking to substitute soybean oil for Canola in their cooking oils.

Some argued that grain-based ethanol demand and resulting corn prices will add to the price of U.S. poultry exports, making them less competitive than exports from Brazil, which relies on sugar cane to manufacture ethanol.  Elam said that as long as oil prices to remain high, so too will the price of corn, owing to greater demand for renewable fuels. “As long as crude oil prices are north of $50 [per barrel],” he said, “we’ll see corn above $3 [per bushel].