Food Fight Over Corn

Groups Eyeing Alliances in Debate Over Alternative Fuels

Posted January 26, 2007 at 5:37pm

If you combine the politics of corn farmers, alternative-fuel advocates, livestock businesses and the oil industry, the result is the lobbying equivalent of a food fight. And it’s complete with shifting alliances on big-ticket items such as this year’s farm bill and policies for ethanol as an alternative to gasoline.

The Bush administration and Members of Congress, looking to shift gas-guzzlers to more alternative fuels, have added to an already volatile debate over high corn prices.

The livestock groups, along with others in the food and beverage industry, are concerned about the rising cost of corn feed that comes with increased demand for corn used to make ethanol. Meanwhile, the oil industry is trying to find any legislative friends it can to slow the pace of converting to ethanol.

As a result, everyone from corn-based ethanol groups to oil executives to meat lobbyists — who rely on corn to feed animals — are working to pull together coalitions to advance their preferred policies.

But actually bringing them together is not easy. One oil industry lobbyist said oil’s chief task is to figure out a way to work with the corn growers. Last week, American Petroleum Institute executives and the group’s outside lobbyists met to figure out ways to link up with the ethanol and corn crowd.

Former Rep. Charlie Stenholm (D-Texas), a senior policy adviser with Olsson, Frank and Weeda, represents the big oil companies through the API as well as the National Association of State Departments of Agriculture and the International Dairy Foods Association.

“There’s a lot of meetings going on, but no one as yet has really gelled on a coalition or strategy,” Stenholm said. “The livestock industry and the nutrition community are all looking at these [proposals], but there is not a lot of meat on the bones yet.”

Bob Greco, director of industry operations at API, said any alliances or coalitions with renewable fuels groups, such as the Renewable Fuels Association, or corn producers is premature.

“We’re still trying to assess the impact on our own operations, let alone other groups,” he said. “But we would continue to look to that group and others.”

Bob Dinneen, president and CEO of the Renewable Fuels Association, said his group has been in touch with the API and plans to sit down this week with livestock groups.

“We clearly recognize that we ought to be working together,” he said. The RFA “applauds the bold ethanol targets” set out by President Bush, Dinneen said. “We don’t see that as a threat.”

But one oil industry lobbyist said RFA members, who produce corn ethanol, want to protect the corn market and don’t want the country to abandon corn ethanol in exchange for ethanol made from other products.

On the oil side, he said, “API has to minimize the damage, so it’s looking for allies.”

When it comes to the farm bill, the high corn prices will keep down the government’s baseline spending for farm “safety net” programs, said Robert Young, chief economist with the American Farm Bureau Federation.

“If they project that market prices are going to be high, then baseline [government] spending goes down a bunch,” he said.

For example, Young said that in 2006 the government spent about $8.8 billion for the corn program. Projections for 2008 for the same program are $2.1 billion, he said.

“There are a lot of intersected, connected dots between the fuels debate, the commodity prices and the farm bill politics because the renewable fuels demand is keeping corn prices high, which is splintering the farm coalitions,” said a Democratic oil industry lobbyist. “It’s also creating a real problem to pass a farm bill to satisfy the interest groups that want more spending because they’ll have to find offsets” for those expenses.

Christopher Galen, a senior vice president with the National Milk Producers Federation, said his group recently sent a letter to Agriculture Secretary Mike Johanns outlining concerns prompted by the focus on renewable fuels and alluding to future splits among agriculture groups.

“Ethanol production will have an economic impact on the U.S. livestock industry; good for some and bad for others,” said the letter, which also was signed by the National Cattlemen’s Beef Association, National Pork Producers Council, National Chicken Council and American Meat Institute. “Producers are currently facing serious pressure from increased demand for finite supplies of corn, its impacts on prices, and even the risk that they may be unable to obtain feed at any price during certain portions of the feed marketing year,” the letter added.

In recent weeks the Grocery Manufacturers Association has brought in representatives from the pork and beef groups to “discuss their concern over rising commodity costs,” said one food and beverage industry source.

In an example of another potential yet fragile alliance, Bill Greer, director of communications for the Food Marketing Institute, said his organization did not sign the letter but shares the concern of livestock groups.

“We need to understand all the implications as the food moves from the farm to the table,” he said. But the FMI also can see the upside to lower fuel costs. “The issue doesn’t lend itself to a quick and easy analysis. As fuel prices go down, so the cost of transporting food could decrease,” he said.

Karen Batra, public affairs director for the National Cattlemen’s Beef Association, said she expects the ethanol debate to be “a hot topic” at the group’s annual meeting this week in Nashville, Tenn.