You may have noticed a lot of ethanol coverage in the press lately, much of it sparked by controversial biofuel-subsidy measures currently making their way through Congress.
Various measures—attached to either the farm or energy bills now under consideration— are floating around Congress, but of particular note is the Renewable Fuels Standard. It is part of the Senate energy bill and would significantly increase the ethanol requirements in the US gasoline supply. Passage would, obviously, be good news for the ethanol industry.
Here is reporter Mark Clayton, in the November 15 Christian Science Monitor:
The measure would create a demand for about 36 billion gallons of ethanol by 2022, or about 15 percent of US gasoline consumption, nearly a fivefold increase from the target under current law. It could also save the industry from an acute glut.
The problem is that corn-based ethanol hasn’t exactly proven its merits, which the media—to its credit—has figured out. There was a time when energy reporters approached ethanol with considerable enthusiasm, but lately it has largely received more skeptical coverage— for inefficient energy production, environmental damage, excessive use of water, and driving up corn prices.
Enter the FT, shoveling fertilizer for agribusiness giant Archer Daniels Midland. Here is the top story listed in the paper’s front-page “News Briefing” section for November 7: “ADM irked by sluggish support for biofuels.” And the teaser:
Archer Daniels Midland, the biggest ethanol producer in the US, said the future of the biofuels sector would be under threat unless Congress and state governments acted to support the industry.
We are puzzled already. First of all, as of about a week before the article, ADM was no longer the country’s largest ethanol producer. As General Howe said to King George: “Oops.” But more importantly, from the industry’s inception ethanol has relied on heavy government subsidies. So the implication that the government doesn’t already “support the industry” gives us pause.
But nonetheless, let’s move on.
The article itself explains that “Patricia Woertz, ADM’s chief executive, said she was frustrated at the slow progress of an energy bill mired on Capital Hill.” You may be wondering why this is news. So are we, quite frankly.
Let’s look at the numbers.
The day after the FT piece, ADM announced its quarterly net income rose to $441 million from $403 million the same quarter last year—despite a downturn in ethanol prices over the past several months. The FT article makes note of this, along with ADM’s announcement that its income from corn-based ethanol in July through September was down 48 percent from the same three months last year.
So, ethanol is not such a big deal after all.
Okay, so we get that ADM is not happy about its corn-based ethanol business. But how does a drop in ADM’s ethanol profits put the future of the entire “biofuels sector … under threat,” and warrant front-page notice?
The article also allows ADM to make a few questionable elisions. The success of ADM’s corn-based ethanol gets equated with the success of ethanol more broadly—despite the fact that cellulosic ethanol shows more promise, these days—and then ethanol more broadly gets equated with the “biofuels sector.” We get this expansion despite the fact that it is not even clear that corn-based ethanol deserves the kind of financial coddling it has been getting. Where is the skeptical reporter in the FT story? The reader needs more information, to balance the voice of ADM, and to introduce subjects that the company, understandably, wouldn’t want to.
The government has long been, shall we say, generous with the ethanol industry. It benefits from aid in the farm bill—corn subsidies— as well as from the energy bill biofuel requirements. In September 2007, Dan Morgan in The Washington Post referred to this as the “double-barreled support system for those who grow corn and those who turn it into fuel.”
To understand the finances of biofuel, you have to consider both agriculture policy and energy policy. And as for farm bill subsidies, the press is rife with attacks on them—one of the chief criticisms being that they are outdated. “So far,” wrote the Post’s Morgan, “Congress has shown little inclination to adjust the subsidies to account for the new energy-driven rural economy.”
Forgive us for thinking that corn-based ethanol producers have received so many subsidies over the years that at this point they feel entitled to them. And that Woertz’s comments might just be a money grab by ADM, timed to pressure legislators. But that said, Woertz’s motivations are understandable. It is the FT’s responsibility to make them clear.