The New York Times (pg. C7)  [Printer-friendly version]
January 5, 2007


By Alexei Barrionuevo

Chicago, Jan. 4 -- Renewing concerns about whether there will be
enough corn to support the demand for both fuel and food, a new study
has found that ethanol plants could use as much as half of America's
corn crop next year.

Dozens of new ethanol plants are being built by farmers and investors
in a furious gold rush, spurred by a call last year from the Bush
administration and politicians from farm states to produce more
renewable fuels to curb America's reliance on oil. But the new study
by the Earth Policy Institute, an environmental group, found that the
number of ethanol plants coming on line has been underreported by more
than 25 percent by both the Agriculture Department and the Renewable
Fuels Association, the ethanol industry's main lobbying group.

The Earth Policy Institute says that 79 ethanol plants are under
construction, which would more than double ethanol production capacity
to 11 billion gallons by 2008. Yet late last month, the Renewable
Fuels Association said there were 62 plants under construction.

The lower tally has led to an underestimate of the grain that would be
needed for ethanol, clouding the debate over the priorities of
allocating corn for food and fuel, said Lester R. Brown, who has
written more than a dozen books on environmental issues and is the
president of the Earth Policy Institute. "This unprecedented
diversion of corn to fuel production will affect food prices
everywhere," Mr. Brown said.

Bob Dinneen, the president of the Renewable Fuels Association, said
the group had not intentionally tried to play down the number of
plants under construction. "It has been a moving target," Mr.
Dinneen said in an interview on Thursday. "We are not trying to hide
the ball. We are trying to keep up with a growing and dynamic industry
as best we can."

The Renewable Fuels Association has generally played down concerns in
the food versus fuel debate over ethanol, saying that estimates showed
there would be plenty of corn to meet the demand for both. "We can
absolutely do that without having a deleterious impact on consumer
food prices," Mr. Dinneen said.

The National Corn Growers Association said Thursday that farmers were
keeping up, noting that growers produced their third-largest crop in
2006 of 10.7 billion bushels. "All demands for corn -- food, feed,
fuel and exports -- are being met," Rick Tolman, chief executive of
the corn growers, said in a statement. "Farmers have always responded
to price signals from the marketplace and, historically, we have had
much more challenge with overproduction than shortage."

With spot prices of corn soaring to record highs of nearly $4 a bushel
last month, farmers are expected to plant some 85 million acres of
corn this year, an increase of 8 percent over 2006 and what would be
the largest corn-seeding in the country since 1985, said Dan Basse,
president of AgResource, an agricultural research company in Chicago.

Ethanol has raised the incomes of farmers and given new hope to
flagging rural economies. But the reliance on corn to produce ethanol
in the United States has drawn concerns from some economists, who
question whether the drive to corn-based fuel will push up the prices
of livestock and retail prices of meat, poultry and dairy products.

Mr. Brown is among those who believe the ethanol industry is growing
too quickly. He called for a federal moratorium on the licensing of
new distilleries. "We need a time out, a chance to catch our breath
and decide how much corn can be used for ethanol without raising food
prices," he said Thursday.

Like many other experts, he advocates moving past corn-based ethanol
into cellulosic ethanol, produced from plant waste and nonfood crops
like switch grass.

For now, however, in the anticipation of high potential returns,
ethanol plants that rely on corn are being built by everyone from
farmers to Bill Gates of Microsoft to a mix of Wall Street investors.
In addition to the 116 ethanol plants in production, and the 79 under
construction, at least 200 more ethanol plants, with a capacity of 3
billion gallons a year, are in the planning stages.

In all, ethanol distilleries now running or in the works will pull an
estimated 139 million tons of corn from the 2008 corn harvest,
according to the Earth Policy Institute. That is about double the
demand projected by the Agriculture Department and will require over
half of the projected 2008 corn harvest of about 11 billion bushels.

Keith Collins, the Agriculture Department's chief economist, did not
respond to requests for comment. One reason for the department's
projection of just 60 million tons of corn used for ethanol is that it
was released last February, before surging oil prices set off investor
interest in ethanol plants. The Agriculture Department will release
its new projections next month.

But the pace of plant construction may be slowing. Shortages of
galvanized steel and backlogs for special tanks for the distilleries
have pushed construction time back from 18 months to as much as 28
months for some plants, Mr. Basse said.

Some towns are also demanding environmental studies to better
understand the impact ethanol plants can have on water supplies and
quality of the groundwater, which has delayed permits for new
processing plants.