Biofuels no sure bet for farmers

[VenSeattle]

A local article about Washington State's farming issue with bio Fuels... Thought some of you would find the info interesting.

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Biofuels No Sure Bet for Farmers

By BILL VIRGIN

P-I COLUMNIST

We ask a lot of farmers: Provide us with a reliable, inexpensive and safe supply of food regardless of weather (here or elsewhere), politics and trade issues, input costs or markets. And did we mention cheap?

Now we want farmers to do the same for energy.

What the oilfields were to transportation in the 20th century, many expect the nation's farms to be in the 21st century, with ethanol, biodiesel and similar products displacing petroleum-derived fuels.

Washington jumped on the biofuel-powered bandwagon in the most recent legislative session with a bill mandating that, by late 2008, 2 percent of the gasoline and diesel fuel that suppliers sell be ethanol and biodiesel. Developers are discussing biofuel and ethanol plants all over the state.

That suggests a major opportunity for a major industry in Washington. Farmers "would love to get into this market," says Kathleen Painter of the Center for Sustaining Agriculture and Natural Resources at Washington State University. "They love the idea of growing for the energy market."

"We think the opportunities are immense," adds Don Stuart, Pacific Northwest states director for American Farmland Trust. "I do think this is something our farmers could do a darn good job at."

But for Washington farmers to reap anything from that major opportunity, they need some answers to some major questions.

Such as, for starters, how much they might be paid for growing crops such as canola that would produce the raw material for refining into biofuels.

"Alternative crops can provide some benefits for dryland grain producers in the Pacific Northwest," says a report co-written by Painter on the economics of canola production in Eastern Washington.

"Oilseed crops, such as rapeseed, canola and mustard, have been used in rotation with wheat and barley in the region since the late 1970s. Including oilseeds in a cereal grain rotation provides a greater choice of herbicide use in the battle against unwanted grasses, thus facilitating weed control. The addition of an oilseed crop also helps loosen hardpan within the soil, and it can break up disease cycles."

But here's the problem: "Although these alternative crops potentially improve yields of the subsequent wheat or barley crop, the market price for oilseed crops during the past several years has caused some producers to produce these crops at a loss."

At times the prices for those alternative crops have dropped so low that farmers decide they don't get enough of the other benefits to make it worth eating that loss. The bottom line, Painter says, is that "the feedstock needs to be worth more."

Prices have been stronger in recent months, as biofuel developers announce projects and line up suppliers. But Painter says farmers want to be certain that prices won't retreat, and that the proposed projects will actually be built.

A further complication in the prospect for prices is competition from other feedstock materials, such as canola oil from Canada, soybean oil from the Midwest and palm oil from Asia. If those supplies hold down the prices farmers here can fetch for what they grow, the effort to develop an energy market for Washington agriculture might never get started.

On the other hand, having another market for crops might dampen the price volatility that constantly plagues farmers. Says Stuart, "It's hard to imagine you could increase the volatility" by developing the energy market. For a few, the "alternative" crop might wind up being more attractive than a primary crop such as wheat, particularly when wheat prices are in a slump and input costs including tractor fuel and fertilizer are climbing.

One other reason farmers are interested in the energy market: World Trade Organization talks and the 2007 farm bill that Congress will be debating.

The farm bill comes up every half decade or so, and each time Congress and the administration of the moment go through an exercise of deciding whether to wean ag off support and subsidy programs (Freedom to Farm, 1996) or reinstate and expand them (the farm bill of 2002).

The 2007 bill is likely to be more of the former than the latter, given the pressure on the United States and other nations in world trade talks to cut subsidies and support. Developing an energy market "will be a huge aid to agriculture, particularly those crops likely to be hammered in the current round of trade talks," Stuart says.

Farmers with high-value crops such as vegetables or tree fruit aren't likely to go after the energy market, says Valoria Loveland, director of the Washington Department of Agriculture. "I see this as an opportunity in agriculture for those who want to participate" to generate revenue or cut costs (as may be the case in converting animal waste to energy rather than disposing of it).

In all the enthusiasm over biofuels as a way to cut oil prices and imports, too little attention has been paid to the financial incentives that will encourage farmers in Washington to participate. It's mostly been about what's in it for motorists. For the industry to achieve any significant size, people will have to start asking what's in it for the farmers.

P-I reporter Bill Virgin can be reached at 206-448-8319 or [email protected].

His column appears Tuesdays and Thursdays

Link: http://seattlepi.nwsource.com/virgin/273964_virgin15.html

[Imaj]

The governement should offer incentives and tax-breaks for farmers who grow crops that could be used to produce biofuels, instead off offering tax-breaks on who buys a hybrid!