Biofuels have caused world food prices to increase by 75 percent, according to the findings of an unpublished World Bank report published in The Guardian newspaper on Friday.16 Ethanol Planys File Bankruptcy
The report's author, a senior World Bank economist, assessed that contrary to claims by US President George W. Bush, increased demand from India and China has not been the cause of rising food prices.
"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," the report said.
The US Ethanol Industry Is In Distress.
The U.S. ethanol industry is in trouble and can expect to see a rash of bankruptcies and dismantling of at least some production, according to a specialist who helps companies in distress.Ethanol Tariffs An Economic Failure
Alex Moglia, president of Moglia Advisors based in the Chicago area, said he knows of at least 16 ethanol companies that are filing for bankruptcy, and there will be at least two to three times that number filing within the next year.
The weakness of the U.S. dollar makes it possible for foreign investors to acquire ethanol plants "at a deep discount," he said.
"They can buy as low as 20 or 30 cents on the dollar," Moglia said. "That should scare the hell out of anyone in the biofuels industry. I've worked with plants that are incomplete, others that can't offer profitably so they've all shut down. This will shake out most of small- and mid-sized players. Larger players will survive because they have buying power."
More ethanol producers will continue to file bankruptcy, he said, because of high feedstock costs and a "limited upside flexibility in terms of how much you can sell ethanol for."
"The demand for ethanol is not there," Moglia said. "The same thing happening to ethanol is happening in the biodiesel business. It will be the Wal-Mart-ization of the ethanol industry. It's just a mess."
Peiffer said many ethanol plants are and will be folding because "the business model they were built on doesn't work." Farmers and their cooperatives have either borrowed money or pledged their land as collateral in building ethanol plants, he said.
For every 10 ethanol and/or biodiesel plants "you read about in the media, there are probably 50 to 100 others that are in financial difficulty and are contemplating shutdown," Moglia said.
Since ethanol production is mandated by the federal government, he said they are already "operating outside free-market fundamentals.
Ethanol Producer Magazine is reporting Brazil launches campaign to remove ethanol tariff.
The Brazilian Sugarcane Industry Association is launching a public relations campaign on the Fourth of July designed to encourage the American public to pressure the U.S. Congress into removing the 54 cent ethanol import tariff. The 2008 farm bill extended the tariff, designed to support an emerging U.S. ethanol industry and to prevent foreign ethanol producers from benefiting from American subsidies, through 2010.Government Mandated Solutions Fail Again
The Are We There Yet? campaign, which consists of an interactive Web site and television ads, is supported by various U.S. food and meat processing companies. The association chose to launch its campaign on the Fourth of July holiday because it’s one of America’s busiest travel holidays.
“Americans are being denied an opportunity to save money at the pump,” said Joel Velasco, chief representative for UNICA. “There is a solution that could have an immediate impact on [the] price at the pump – lifting the tariff on imported ethanol.”
- 16 ethanol producers have gone bankrupt, many more are on the way.
- Farmers pledging land as collateral for ethanol production are at risk.
- Food prices are higher.
- Consumers are paying higher prices at the pump.
- Corn is fertilizer intensive. Growing corn for ethanol production drives up the cost of fertilizer.
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