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Will milk become America’s new oil?
David Mercer, Associated Press
Dairy futures climb with transport and feed costs
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…Dairy market forecasters are warning that consumers can expect a sharp increase in dairy prices this summer. By June, the milk futures market predicts, the price paid to farmers will have increased 50 percent this year — driven by higher costs of transporting milk to market and increased demand for corn to produce ethanol.
U.S. retail milk prices this year have increased about 3 percent, or roughly a dime a gallon, according to the U.S. Department of Agriculture.
But University of Illinois dairy specialist Michael Hutjens forecasts further increases of up to 40 cents a gallon for milk over the next few months, and up to 60 cents for a pound of cheese.
That would drive the cost of a gallon of whole milk around the country to an average of $3.78, based on the USDA’s monthly survey of milk prices in 30 metro areas.
Prices in the last survey, earlier this month, ranged from $2.76 a gallon in Dallas to $3.86 in Chicago and $4.09 in New Orleans, where the dairy industry has struggled to bounce back from Hurricane Katrina.
Hutjens and others said higher fuel prices have increased the cost of moving milk from farm to market, and corn — the primary feed for dairy cattle — is being gobbled up by producers of ethanol. The USDA projects that 3.2 billion bushels of this year’s corn crop will be used to make ethanol, a 52 percent increase over 2006.
(1 June 2007)
Also at The Telegram
As pork prices soar, Chinese put brakes on corn for ethanol
Peter Ford | Staff writer of The Christian Science Monitor
With a famine less than 50 years in its past, China remains sensitive about using food for fuel.
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Beijing – Ethanol production has put the Chinese government in an unpleasant bind, as fears rise that the environmentally friendly gasoline additive is also fueling politically dangerous increases in the price of food – particularly pork, a key staple.
With the ethanol industry gobbling up a growing share of China’s corn harvest, authorities have stomped on the brakes to slow what one official report calls “blind” investment in distilleries.
“China cannot sacrifice food security for energy: that seems to be the majority view in the government now,” says Zhang Zhongjun, deputy head of the Beijing bureau of the United Nations’ Food and Agriculture Organization (FAO).
Prime Minister Wen Jiabao offered the latest sign of government concern when he made a highly publicized visit last weekend to a piggery and a meat market in Xi’an, about 750 miles southwest of Beijing. The price of pork has gone up by 29 percent over the past year and the price of live pigs by 71 percent, according to the Agriculture Ministry.
In a country where people eat more pork than anywhere else in the world except Germany, that jump in the price of a staple has dominated recent headlines and sparked grumbling.
(31 May 2007)
Cargill chief warning on biofuels boom
Associated Press
MINNETONKA, Minn. – If you see a 6-foot, 3-inch guy in-line skating around Lake Harriet chatting about North Dakota, about how farmland is too expensive or about grain (especially if you hear him talking about grain), say hello to Gregory Page, the new CEO of Cargill Inc.
…[Cargill is] the world’s largest producer of salt, supplies a quarter of the meat consumed in the United States, all of the eggs eaten at McDonald’s and is the largest poultry producer in Thailand
…He repeatedly has sounded cautionary bells about biofuels. Speaking at a food industry meeting about 1½ years ago, Page warned farmers that the rising cost of energy could reshape how crops are used – whether for food, fuel or feed.
“In a world awash in record crops, this worry may seem idle, but how might it look if we encounter back-to-back short crops?” he said.
Speaking more recently, he underscored the importance of food first, fuel second, for the world’s crops.
“The fact that we can even contemplate doing both, I think, is a huge endorsement of the progress that agriculture’s put in place over the last 20 to 30 years.”
Page has also explained why it’s not prudent to jump on the ethanol bandwagon, saying that support for ethanol could evaporate if people sense that it drives up the cost of food, a situation that appears to be happening today. Many food companies, including Hormel last month, are reporting higher costs and lower earnings because of the rising cost of corn.
The company has not invested as heavily in the renewable energy industry as its rival Archer Daniels Midland, but it has ethanol plants in Eddyville, Iowa; and Blair, Neb.; and a biodiesel plant in Iowa Falls, Iowa. Emerald Renewable Energy, a Cargill subsidiary, plans to build four ethanol plants in the Midwest, and recently purchased land in Illinois for one of those facilities. The company also has two biodiesel plants in Europe.
(2 June 2007)
Financial Times has a similar article behind a paywall: Cargill chief in warning over biofuels boom:
Cargill’s new chief executive has warned that the boom in renewable fuels could be derailed by a succession of poor harvests, intensifying upward pressure on food costs as land is devoted to energy-related production.
…”The big risk is that we are sowing the seeds of unintended consequences,” Mr Page said in an interview with the FT ahead of his installation as chief executive on June 1.
Mr Page’s views echo those of his predecessor, Warren Staley, who repeatedly called for a balanced debate among policymakers about the competing claims of food and fuel.
“It’s just food first, fuel second,” said Mr Page, who has in the past questioned subsidies for the US biofuel industry, reflecting Cargill’s long-held support for market forces and free trade.
