trouble ahead for grain based ethanol

Ethanol skeptic sees painful realities ahead
BY ART HOVEY / Lincoln Journal Star

What he can’t see coming from his seventh-floor office window in downtown Lincoln, Doug Carper can usually piece together on the four, super-sized computer screens at his desk.

Having pored over all the charts and graphics, and having weighed the numbers against his many years as an agricultural commodities broker, the 56-year-old Carper sees trouble coming for Nebraska’s ethanol industry.

He sees more of the same for much of the agricultural economy that supports ethanol.

“I’m not posturing. I have no agenda,” Carper said in a Tuesday interview in his office. “I see trouble looming here in the American heartland and a lot of good, well-intentioned people facing some terrible and ruinous losses.”

His sense of trepidation may seem completely at odds with recent reality.

Expansion in the ethanol industry in Nebraska is proceeding at an unprecedented pace. Corn prices are rising. Congress seems poised to expand its mandate of renewable fuels.

But circumstances that lead others to conclude there’s money to be made by aggressive investment have Carper thumping his desk so hard pens leap in the air.

“For what constructive purpose are we disrupting agriculture in this manner?” he asked. “For what constructive purpose have we embarked on this dangerous public policy initiative?”

As far as Carper is concerned, there is no constructive purpose to putting so much emphasis on ethanol as an answer to shrinking energy resources.

Even if every bushel of corn in the United States were turned into ethanol, it wouldn’t make much of a dent in overseas oil dependence, he said.

“It’s a delusion that somehow we are solving the country’s energy needs when, in fact, at the extreme, ethanol could never be a substantial solution to the nation’s energy requirement. It’s patently wrong and absurd to think we can.”

Beyond that, he sees so much emphasis on ethanol leading to higher food prices. He sees what he called a tremendous negative effect on the state’s cattle feeders, possible disruption in the food distribution system and some substantial portion of new ethanol plants failing to make a go of it as profit margins inevitably narrow.

How sure is he he’s right about that last point?

“As sure as I can be that poorly capitalized, shakily managed companies almost always have a fairly high fatality rate.”

With politicians of every political stripe singing ethanol’s praises, Carper knows how hard it is to make criticism heard. Maybe that’s why his voice tends to rise in volume as he refers to what he describes as “the realization phase” and replies to questions that call for some detail.

“We’re going to need the largest year-to-year increase in corn production,” he said.

“We’ve never shifted more than 3 million acres in history. And we’re going to need 6 or 7 million, if not 10 million acres, this (next) year.”

Furthermore, counting so heavily on ethanol as an energy answer leaves no room for a poor crop, he said.

“You can only imagine that the job next year becomes even more difficult, because we continue to ramp up. ... We’re simply raising the bar and raising it every year.”

Nebraska will pay a price in increased irrigation consumption, in removal of erodible acres from the Conservation Reserve Program, and in less obvious ways, he said.

“Farmers are good stewards of the land,” he said, “but money talks.”

At distant points that count on the United States for corn exports, hunger will be a result of what he describes as a food or fuel fight.

“You won’t go hungry. I won’t go hungry. But somebody will go hungry.”

Don Hutchens, executive director of the Nebraska Corn Board, sees no reason, so far, to worry about ethanol causing corn producers to fall behind in efforts to keep up with the state’s corn demand.

“If we look into what we know is under construction in Nebraska today and at the picture as it might look in three years, I’m not very nervous about that aspect,” Hutchens said.

Nebraska exports about 420 million bushels of corn per year, he said. More ethanol means more value added to a product that stays at home.

“I think, economically, we become much better off than to load it on a rail car to the international marketplace or to another domestic location.”

What about hunger in far-off places? Hutchens answered with another question: “Is it the responsibility of the Nebraska corn farmer to keep prices as low as he possibly can so no one in the world has food availability issues?”

Back at Carper’s office, a much more skeptical ethanol watcher cites “the most bullet-proof scheme that any lobbying group ever devised in such a short period of time.”

And he said he’s not vulnerable to accusations of occupational ax grinding.

For whatever influence ethanol may have on grain trading, he’s out of that business now and into managing other people’s money.

But his previous occupation, which he took up at age 22, gives him some historical frame of reference on remarkable and uncertain times for the nation’s ethanol-energy connection.

“We’re really embarking on uncharted territory,” he said. “In all the years I’ve been trading, I’ve never seen anything like it.”

http://www.journalstar.com/articles/2006/11/30/local/doc456e13dc546e6066474346.txt