Agri firms form group to push case for biofuels

Business Times 26 Jul 08;

Their plan is to increase agricultural productivity to meet fuel, food demands

(ST LOUIS) The argument over using crops to make biofuels is about to get a little louder, courtesy of a new group formed by some of the biggest agribusiness companies in the world.

The new group - formed by Monsanto Co, Archer Daniels Midland, Deere & Co and DuPont Co - announced on Thursday that it will use national advertisements and lobbyists on Capitol Hill to build the case for using crops to make fuels like ethanol and biodiesel, even as grain prices climb worldwide.

Just a niche market three years ago, the biofuels industry has blossomed because of federal mandates requiring the US to use nine billion gallons (34 billion l) of alternative fuel annually by 2009. The mandates are under attack from a wide variety of groups that blame the new industry for rising food prices that have sparked riots and hoarding everywhere from Haiti to South-east Asia.

Organisers of the newly formed Alliance for Abundant Food and Energy said that they want to change the debate about biofuels. Their plan is to convince consumers and politicians that both goals can be met at once by increasing agricultural productivity.

'I think the only path forward is one that meets both food and energy security demands,' said Monsanto's chief technology officer, Robert Fraley. 'I think we can add a component of science and technological perspective to the discussion.'

Monsanto hopes to double the yield-per-acre of crops like corn and soya beans by 2030, he said. Pioneer Hi-Bred, a division of DuPont, plans to boost yields of its seeds by 40 per cent within a decade.

The alliance plans to lobby federal lawmakers to keep current ethanol mandates while increasing funding for agricultural research and development that could increase crop yields. It also plans to try to sway consumers by telling them that new technologies will make it possible to grow enough food to affordably fill petrol tanks and grocery carts.

Companies behind the alliance stand to benefit from any increase in farming and grain consumption, whether it be increased use of Archer Daniels Midland's new ethanol plants, Monsanto's seeds or Deere & Cos farming equipment.

The alliance did not say how much it will spend on the campaign, beyond saying that the project has a budget worth several million dollars. But even that kind of cash does not guarantee that Congress will not revisit the wisdom of biofuels mandates.

The alliance faces opposition from well-funded agricultural interests that are suffering under rising food costs, including the American Meat Institute and the Grocery Manufacturers Association (GMA).

The GMA is already funding a campaign to highlight the negative effect of rising grain costs for average consumers, and it wants Congress to reconsider the federal ethanol mandates. The GMA is not swayed by the idea of waiting for agricultural productivity to improve, GMA vice-president for federal affairs Scott Faber said in a statement.

'While improvements in global agriculture are vital, this work must not distract us from the fact that while we wait, millions of people will be pushed deeper into hunger and poverty because we are diverting more and more food and feed supplies to producing ethanol,' he said in a statement. 'Congress and the administration can take immediate action to curb hunger by revisiting these flawed policies.'

About 22 per cent of the US corn crop went to produce biofuels this year, which is virtually the same as last year, according to the National Corn Growers Association. A full 33 per cent of this year's harvest, or 3.9 billion bushels, is expected to go towards ethanol production.

While virtually all experts agree that using crops for biofuels drives up the price of grain, opinions vary greatly as to how much.

White House economic advisers said the ethanol industry accounts for just 2 per cent to 3 per cent of the recent jump in grain prices, which are up more than 40 per cent this year over last year.

Estimates cited by the International Food Policy Research Institute and others say biofuels account for more than 30 per cent of the increase.

Cutting back US ethanol mandates would badly damage a booming US biofuels industry that is just now starting to deliver domestically produced fuel to consumers, said Archer Daniels Midland vice-president Todd Werpy\. \-- AP