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FOOD FEED, AND FUEL PRODUCTION: 

TODAY AND TOMORROW 

FIELD HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

AUGUST 18, 2008 

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry 

( 

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY 

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa 

MARK HALVERSON, Majority Staff Director 

JESSICA L. WILLIAMS, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority General Counsel 

(II) 

(III) 

C O N T E N T S 

Page 

FIELD HEARING(S): 

Food Feed, and Fuel Production: Today and Tomorrow ....................................... 1 

Monday, August 18, 2008 

STATEMENTS PRESENTED BY SENATORS 

Harkin, Hon. Tom, a U.S. Senator from the State of Iowa .................................. 1 

Nelson, Hon. Benjamin E., a U.S. Senator from the State of Nebraska ............. 3 

Panel I 

Babcock, Bruce, Professor of Economics, and Director, Center for Agricultural 

and Rural Development, Iowa State University, Ames, Iowa .......................... 5 

Jenkins, Jim, Chairman, Nebraska Ethanol Board, Callaway, Nebraska .......... 11 

Lapp, Bill, Principal, Advanced Economic Solutions, Omaha, Nebraska ........... 14 

Lautt, Jeff, Executive Vice President, Corporate Operations, Poet, Sioux Falls, 

South Dakota ........................................................................................................ 7 

Moody, David, President, Iowa Pork Producers Association, Clive, Iowa ........... 10 

Recker, Tim, President, Iowa Corn Growers Association, and Farmer, Arlington, Iowa ............................................................................................................... 16 

Panel II 

Dale, Bruce, Associate Director, Office of Biobased Technologies, and Distinguished University Professor, Department of Chemical Engineering and 

Materials Science, Michigan State University, East Lansing, Michigan ........ 35 

DiMagno, Stephen, Professor, University of Nebraska-Lincoln, Lincoln, Nebraska .................................................................................................................... 38 

Foust, Thomas, Biofuels Technology Manager, National Renewable Energy 

Laboratory, Golden, Colorado ............................................................................. 33 

Oestreich, Dean, Chairman, Pioneer Hi-Bred, and Vice President, Dupont 

Agriculture and Nutrition, Johnston, Iowa ........................................................ 30 

APPENDIX 

PREPARED STATEMENTS: 

Nelson, Hon. Benjamin E. ............................................................................... 50 

Babcock, Bruce .................................................................................................. 51 

Dale, Bruce ........................................................................................................ 55 

DiMagno, Stephen ............................................................................................ 61 

Foust, Thomas .................................................................................................. 64 

Jenkins, Jim ...................................................................................................... 71 

Lapp, Bill ........................................................................................................... 74 

Lautt, Jeff .......................................................................................................... 82 

Moody, David .................................................................................................... 90 

Oestreich, Dean ................................................................................................ 95 

Recker, Tim ....................................................................................................... 99 

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Association of Nebraska Ethanol Producers, prepared statement ............... 104 

Clean Fuels Development Coalition, prepared statement ............................. 106 

Page

IV 

DOCUMENT(S) SUBMITTED FOR THE RECORD—Continued 

‘‘The Impact of Ethanol Production on Food, Feed and Fuel’’, Ethanol 

Across America .............................................................................................. 110 

University of Nebraska-Lincoln, Institute of Agriculture and Natural Resources, Department of Animal Science, prepared statement ................... 115 

QUESTIONS AND ANSWERS: 

Harkin, Hon. Tom: 

Written questions to Bruce Babcock ............................................................... 118 

Written questions to Bruce Dale ..................................................................... 119 

Written questions to Thomas Foust ................................................................ 120 

Written questions to Jim Jenkins ................................................................... 121 

Written questions to Bill Lapp ........................................................................ 122 

Written questions to Jeff Lautt ....................................................................... 123 

Written questions to Dave Moody ................................................................... 124 

Chambliss, Hon. Saxby: 

Written questions to Tim Recker .................................................................... 125 

Babcock, Bruce: 

Written response to questions from Hon. Tom Harkin ................................. 127 

Written response to questions from Hon. Saxby Chambliss ......................... 128 

Dale, Bruce: 

Written response to questions from Hon. Tom Harkin ................................. 130 

Foust, Thomas: 

Written response to questions from Hon. Tom Harkin ................................. 133 

Jenkins, Jim: 

Written response to questions from Hon. Tom Harkin ................................. 137 

Lapp, Bill: 

Written response to questions from Hon. Tom Harkin ................................. 138 

Lautt, Jeff: 

Written response to questions from Hon. Tom Harkin ................................. 139 

Moody, Dave: 

Written response to questions from Hon. Tom Harkin ................................. 141 

Recker, Tim: 

Written response to questions from Hon. Saxby Chambliss ......................... 142 

(1) 

FOOD FEED, AND FUEL PRODUCTION: 

TODAY AND TOMORROW 

Monday, August 18, 2008 

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

Omaha, Nebraska 

The committee met, pursuant to notice, at 9 a.m., at the University of Nebraska-Omaha, Strauss Performing Arts Center, 60th and 

Dodge Streets, Omaha, Nebraska, Hon. Tom Harkin, Chairman of 

the committee, presiding. 

Present or submitting a statement: Senators Harkin and Nelson. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY 

Chairman HARKIN. The Senate Committee on Agriculture, Nutrition and Forestry will come to order. 

STATEMENT OF JOHN CHRISTENSEN, CHANCELLOR, 

UNIVERSITY OF NEBRASKA-OMAHA, OMAHA, NEBRASKA 

Mr. CHRISTENSEN. Thank you, Senator. Good morning and welcome to the University of Nebraska at Omaha and the Strauss Performing Arts Center. I am John Christensen, Chancellor at the 

University of Nebraska at Omaha, and on behalf of the campus 

community, it is a privilege to host this U.S. Senate field hearing 

on Food, Feed, and Fuel Production. 

It is always an honor to have Senator Ben Nelson back in Omaha 

and on campus and it is a pleasure to welcome Senator Harkin 

from our neighboring State of Iowa. Senator Harkin chairs the Senate Agriculture, Nutrition, and Forestry Committee and Senator 

Nelson serves on that committee. Together, they have assembled a 

distinguished panel of experts to discuss issues concerning the economic landscape of agriculture, renewable fuels, and the potential 

for increasing production of grains, among many other important 

topics. 

I trust that this will be a productive hearing and please enjoy 

your time on campus. With that, Senator Harkin? 

Chairman HARKIN. Chancellor, thank you very, very much. 

Good morning to all of you. It is good to be here in Omaha, the 

heartland of American agriculture, this time of the year. All I can 

say is I hope the ragweed count is lower on this side of Missouri 

than it is on the other side. My allergies—— 

Senator NELSON. It is always high. 

2 

Chairman HARKIN. Oh, man, it is terrible this time of the year. 

But with all the disastrous flooding and weather that we have had 

over our way, anyway, we are grateful that the crops seem to be 

shaping up better than we feared earlier. 

I am especially glad to be here with my good friend and my colleague, Ben Nelson, former Governor of this great State and now 

distinguished Senator. I am just very privileged to have someone 

with his background and his breadth of knowledge of agriculture 

serving on the Senate Agriculture Committee. 

Ben was very instrumental in getting our recent farm bill 

through, which took considerable time and effort, but I think we 

can take some pride in the fact, Senator Nelson, that the bill 

passed the committee without one dissenting vote, so we have Republicans and Democrats, North, South, East, West, on board. And 

it passed the Senate with 79 votes, more than any farm bill ever 

in Senate history. So I think it was a good farm bill and good for 

the future and I just want to thank Senator Nelson for all of your 

work and effort in getting that through. 

I had one question, though, that was plaguing me as I thought 

about coming over. I thought, you know, since Iowa is the Corn 

State—supposedly, that is what we call ourselves, the Corn State— 

how is it Nebraska always comes up with all those Cornhusker 

football players who are so good and who beat us all the time? I 

have got to figure that out one. 

Well, agriculture and rural America, are at the center of dramatic changes and challenges right now. Energy prices, in particular oil and natural gas prices are at record levels, and while 

they may have retreated a little bit they are expected to remain 

well above historic levels of the last several decades. This is a real 

challenge for Americans, and that’s especially true in rural America where people have no choice but to purchase energy for their 

farms, businesses, and homes. They have to travel large distances 

to get to their jobs, to church, family, visits to the doctor and 

schools. 

Rural America has been rapidly increasing the production of renewable energy, specifically biofuels and wind power, and this is a 

major win-win development because domestically produced renewable energy is one of the keys to reducing our dependence on fossil 

fuels, and on imported oil in particular. At the same time, these 

new industries are a shot in the arm for rural economic growth and 

farm income. 

In just the past 2 years, grain and oil seed prices have also risen 

above the typical levels of the past few years, and while rising farm 

commodity prices have boosted income for many agriculture producers, these kinds of pronounced price shifts also have consequences for others in the agriculture sector. In particular, strong 

commodity prices means increased production costs for pork and 

beef, poultry, egg and dairy producers, as well as increasing feedstock costs for ethanol and our biodiesel plants. 

These economic shifts, including rising energy prices, rising commodity prices, related changes in acres planted, the increasing production of biofuels, have led many to question whether we are on 

the right path. Whatever one’s views on that question, it is clear 

3 

that in our present energy situation, we face both huge challenges 

and potentially huge opportunities. 

So we policymakers need to understand the impacts and the 

tradeoffs better. It is especially important to examine them as witnessed and experienced here in the Midwest, where people are living their lives and operating their businesses right in the middle 

of these major economic shifts. 

That is exactly why Senator Nelson and I have called this hearing. This morning, we want to examine the current situation with 

prices and production costs as well as the new opportunities and 

challenges that have arisen. Then we will take a look at future 

prospects for the transition of the agriculture sector to producing 

growing amounts of fuel and energy in addition to the food, feed, 

and fiber that we have done in the past. 

With that, I will turn to my distinguished colleague and good 

friend, Senator Nelson. 

STATEMENT OF HON. BENJAMIN E. NELSON, A U.S. SENATOR 

FROM THE STATE OF NEBRASKA 

Senator NELSON. Well, thank you very much, Chairman Harkin, 

and thank you, Chancellor Christensen. I know this is a double opportunity for UNO for us to be here today, and not the least of 

which is the opportunity for some of the students to be able to hone 

their skills in taping and following along with the communications. 

So I appreciate that very much, as well. 

Senator Harkin, it is always good to have you in Nebraska. We 

prefer it when it is not a football Saturday, but we are glad to have 

you here. I think we have Iowa right where we want them when 

it comes to football—off the schedule. We are hoping that the 

Cornhuskers are well on their way back. 

It is good to be with my friend, Senator Harkin. A little known 

fact is every so often in December, we get a chance to hunt together and we take that very seriously. I am hoping maybe we will 

be able to do that again this year. It is about time. 

Chairman HARKIN. I hope so. 

Senator NELSON. And to say thanks for scheduling this hearing 

because of the importance of getting facts out about ethanol, about 

our energy needs, and about our energy sources and how we can 

deal with what is clearly the No. 1 problem in terms of our economy for every American. There are some Americans hit harder 

than others, but we are all affected by the low dollar, by high oil 

prices and escalating food prices, and sometimes it is just important to have the facts as opposed to all the opinions that are floating out there. Opinions based on fact are one thing, but opinions 

that seem to be lacking facts are something that we ought to deal 

with and get to the bottom of. 

Now, I will admit that corn-based ethanol is not perfect, but it 

has been blamed for practically every problem under the sun. You 

have to ask, what is next, summer colds? Computer viruses? Bad 

hair days? The focus here should be on what I think is the bigger 

picture. 

Ethanol is the only domestically produced alternative to oil-based 

transportation fuels. It is helping us in a major way to stretch the 

gasoline supply, save American consumers money at the pump, creVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
4 

ate jobs in rural communities, improve our rural and national economy, and to top it off, help wean us off imported oil. 

Ethanol is a major contributor to the U.S. gasoline supply. One 

study says it is the third largest behind only Canada and Saudi 

Arabia and ahead of Iraq and other OPEC countries. And today’s 

corn-based ethanol is paving the way for the next generation of 

biofuels produced from such materials as switchgrass and stover, 

wood chips, and a whole host of other biomass materials. 

There are those who have said, well, that makes a lot more sense 

than corn-based ethanol and they are happy to be part of the second generation of ethanol. I am glad that there is a second generation. I wish those folks had been here to help us in the first generation, because without the first generation, I can say without any 

question of being contradicted with my good friend Senator Loren 

Schmidt here, that if it hadn’t been for corn-based ethanol as the 

first generation, you wouldn’t be talking perhaps about a second 

generation. 

So to ethanol’s critics, I ask, why farm out our energy needs to 

foreign suppliers when we are producing so much clean burning renewable fuel right here on our own farms? And Senator Harkin 

and our committee, our Senate Agriculture Committee, worked 

hard to change the name officially from the farm bill to the Food 

and Energy Security Act, because we recognized that we are dealing both with food security and energy security here at home. 

We all want to see agriculture survive and prosper, including 

grain farmers, livestock producers, ethanol producers, and food 

processors, while still benefiting the average American family, our 

local communities, our national energy security, and the national 

economy. This is money wisely invested in the American Midwest 

and not in the Middle East. 

So I am looking forward to hearing our witnesses today and 

hopefully see the facts provided as we explore the relationships between food, fuel, and feed, and we have added another ‘‘F’’ word, 

fiber, because we recognize the importance of that part of agriculture, as well. I am especially pleased that we are able to do it 

here in the Midwest where agriculture is king and it is something 

that has dominated the news recently. 

I am just hopeful that we will be able to see what ethanol contributes in the way of supporting lower gas prices. One estimate 

noted that ethanol lowers gas prices by 15 percent, which at today’s 

prices, which are changing—fortunately, they have been going 

down, rising a little, but the trends seem to be good—it would 

lower gas prices by 57 cents per gallon. And an Iowa State study 

estimated that ethanol lowered the price of gasoline by as much as 

29 cents to 40 cents per gallon. So I would suggest that ethanol’s 

critics do keep that in mind the next time they fill up their tank. 

So with that, let us now turn the program back to Senator Harkin, who I know will be introducing the panelists. Thank you. 

Chairman HARKIN. Thank you very much, Senator Nelson. 

We have two panels of distinguished individuals. The first panel 

was organized to talk about the current status of agriculture economics and energy, and related issues. The second panel is looking 

more towards future possibilities, productivity and sustainability 

issues. However, I am sure there is going to be a lot of crossover 

5 

from one panel to the other because we are here to talk about what 

is down the road in the future. 

So with that, we will just start with our first panel. We have a 

copy of your written statements. They will be made a part of the 

permanent record in their entirety, without objection. I would like 

to ask as we go down the row—I will start with Dr. Babcock—if 

you could just limit your comments to maybe five or six minutes. 

So we thank you for coming here to Omaha this morning. Thank 

you for being a part of this panel and this process, but even more 

so, I thank all of you for all of your involvement. I have read all 

of your bios and I read your testimonies last night and I just thank 

all of you for your involvement in this issue of agriculture and its 

evolution, how we are going to balance these needs, and what our 

future is going to be like in terms of providing both, as Ben said, 

the food and fiber, but also fuel. 

With that, Dr. Babcock, you are first up to the plate. Welcome. 

STATEMENT OF BRUCE BABCOCK, PROFESSOR OF ECONOMICS, AND DIRECTOR, CENTER FOR AGRICULTURAL AND 

RURAL DEVELOPMENT, IOWA STATE UNIVERSITY, AMES, 

IOWA 

Mr. BABCOCK. Thank you, Mr. Chairman, Senator Nelson, for the 

opportunity to testify today about how the economics of agriculture 

have recently changed. 

From about 1950 until just recently, we experienced a long-term 

decline in inflation-adjusted food and agricultural commodity prices 

because productivity growth outpaced demand growth. This decline 

in real prices meant that more of the world’s poor were able to afford adequate calories and to move to a more varied diet. This increasing ability to feed a rapidly expanding population was a major 

success story for the second half of the 20th century. 

The move toward food with higher protein and fat content has 

meant a steady increase in the demand for feed grains and oil 

seeds. This demand growth, combined with a slowdown in investment in agriculture research, may have meant a future in which 

supply would have more trouble keeping up with demand and a 

possible reversal of the long-term decline in real food prices. We 

will never know because the recent sharp increase in fossil fuel 

prices, combined with changes in biofuels policy, has made that 

possible future a reality today. 

Up until the last 2 years, energy prices affected agriculture primarily by influencing production costs, particularly fertilizer and 

diesel prices. But we have now linked energy and feed prices so 

both production costs and crop prices are influenced by energy 

prices. Biofuels plants’ ability to pay for corn and vegetable oil are 

directly influenced by crude oil prices. 

Corn and soybean farmers today and in the next 5 years are in 

a can’t lose demand situation because of the new RFS and the 

rapid expansion in biofuels plant capacity, so let me explain. For 

corn farmers, the new ethanol mandates means that they have a 

new demand for between 25 and 30 percent of their crop. To induce 

farmers to plant adequate corn acreage will require prices high 

enough to cover the costs of planting an additional 15 to 20 million 

acres. I estimate that we will need at least $3.50 to $4 corn per 

6 

bushel, and that is needed to ensure adequate acreage. This level 

of prices should be adequate to cover all non-land production costs. 

So the future looks pretty bright for corn producers. If crude oil prices remain above $100 per barrel, then the economics of corn ethanol production will look so good that I expect 

the corn ethanol industry to grow beyond mandated levels, particularly if the blenders tax credit is continued. 

Strong corn prices also mean strong soybean prices because of 

the competition for land between the two crops. The only potential 

downside in demand for U.S. soybeans is if South America ramps 

up production so rapidly that world supplies overwhelm demand. 

But poor policy decisions in Argentina and Brazilian plans to devote increasing amounts of land to sugar cane production suggest 

that soybean production in South America will not be overly rapid. 

Excess biodiesel capacity guarantees that soybean oil prices will 

not fall too rapidly, even if South America does ramp up production. Low soybean oil prices would quickly trigger biodiesel production in idled plants, which would quickly strengthen prices. The 

level of the price support for soybeans and soybean oil depends on 

the price of diesel and whether the biodiesel tax credit is extended. 

With a wholesale price of $3.50, soybean oil prices should not fall 

below about 50 cents per pound. At current soybean oil prices, this 

oil price translates into a soybean price of about $11 to $12 a bushel. So corn with $4, soybeans at $11, corn and soybeans are looking 

pretty good for the next 5 years. 

The impact of continued high feed costs on the U.S. livestock industry is fairly straightforward. Livestock prices will eventually increase enough over the next year or two to cover producers’ increased feed costs. This price increase will happen either because 

U.S. producers or producers in other countries reduce production. 

It will likely be a combination of both, though high feed and transportation costs actually could work to the long-term advantage of 

U.S. producers. 

When feed is inexpensive and shipping costs are low, producers 

in other countries aren’t too disadvantaged by importing U.S. grain 

and exporting meat. But high feed and shipping costs makes imported feed a much more important cost of production, which increases the advantage of U.S. producers because they only have to 

ship the meat. They don’t have to ship both meat and feed. Furthermore, many U.S. producers have an advantage in that their 

animals’ manure can be readily used as a substitute for high-priced 

fertilizer. 

But as increased feed costs work themselves through the system, 

we will see dairy, meat, and egg prices higher than they otherwise 

would be. If we somehow cap the amount of animal feed that goes 

into biofuels production, then we will eventually see corn and soybean productivity gains show up again in lower food prices. 

To summarize, the economics of agriculture have been fundamentally changed by the linkage of energy and feed markets. There 

seems little doubt that we will see biofuels production from corn 

and vegetable oil meet the new mandated levels. If future plant capacity does not exceed these levels, then future productivity gains 

will only need to keep up with increased food demand rather than 

increased food and fuel demands. This lower threshold of performVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
7 

ance should increase the odds that a high-quality diet will continue 

to be affordable for a large proportion of the world’s populations. 

[The prepared statement of Mr. Babcock can be found on page 51 

in the appendix.] 

Chairman HARKIN. Thank you very much, Dr. Babcock. I made 

a mistake. I should have introduced you appropriately. Dr. Babcock 

is the Professor of Economics and he is Director of the Center for 

Agricultural and Rural Development at Iowa State University, with 

over 20 years’ experience in the field. He is a nationally recognized 

expert on the state of the agriculture economy and the impact of 

Federal biofuel policies on agricultural markets. Thank you, Dr. 

Babcock. 

Next, we turn to Mr. Jeff Lautt, the Executive Vice President of 

Corporate Operations at POET, the nation’s top ethanol producer. 

Based in Sioux Falls, South Dakota, POET is a 20–year-old company that currently operates 23 production facilities in the United 

States, I am told, with three more under construction. The company produces and markets more than 1.3 billion gallons of ethanol 

annually. 

Mr. Lautt, welcome to the committee. Please proceed. 

STATEMENT OF JEFF LAUTT, EXECUTIVE VICE PRESIDENT, 

CORPORATE OPERATIONS, POET, SIOUX FALLS, SOUTH DAKOTA 

Mr. LAUTT. Mr. Chairman and distinguished committee members, thank you for the opportunity to visit with you today. POET, 

as you said, has 23 ethanol production facilities currently in operation and three more that will be commissioned this fall, bringing 

our total production capacity over 1.5 billion gallons per year. 

Energy independence for the United States can be a reality. This 

is the result of an ever efficient corn-based industry coupled with 

the future of cellulosic ethanol. Thanks to the tremendous corn 

yield improvements, grain-based ethanol has the potential to continue to grow by leaps and bounds. We believe that 50 billion gallons of grain-based ethanol per year can be produced here in the 

U.S. in the next couple of decades without substantially increasing 

food prices or acres. 

Grain ethanol production is also getting more efficient and more 

environmentally friendly. According to a recent study by Argon 

Laboratories, in just the last 5 years, the dry mill ethanol industry 

has reduced energy consumption by 22 percent and water usage by 

26 percent. Developments are being made possible to eliminate natural gas usage by the refineries, as well. 

One example is our plant in Chancellor, South Dakota, which in 

the next couple of weeks will commission a solid fuel boiler that 

will burn wood waste to power 60 percent of the plant’s power 

needs. A pipeline is also being installed to a nearby landfill which 

will pipe methane gas to the bio-refinery. Eventually, this will replace nearly all of the plant’s natural gas usage. 

The U.S. also has an incredible natural resource of biomass. A 

report from the DOE and USDA show that there is over one billion 

tons of available biomass in this country. This biomass could eventually be turned into energy if our nation is committed to doing so. 

One million tons of biomass has the potential to turn into 85 billion 

8 

gallons of cellulosic ethanol annually. If you combine this with the 

grain-based ethanol opportunity, we could eventually produce 135 

billion gallons of ethanol, which is over 90 percent of the nation’s 

gasoline usage. This, of course, requires sound and stable policy. 

Today, the renewable fuels industry is facing some major challenges. The ethanol industry has been the target of a public relations defamation campaign that has severely damaged our industry’s reputation. This campaign has inaccurately pitted food 

against fuel. Food or fuel is not a choice we have to make. It does 

not need to be one or the other. It can and should be both. 

An issue that clearly needs to be understood is that there is currently a small market for ethanol in the U.S. Contrary to many beliefs, there is not an undersupply of ethanol today, but rather an 

oversupply. That is why ethanol is currently selling for approximately one dollar under gasoline. According to auto manufacturers, 

most of the vehicles in this country are only warranted for 10 percent ethanol. Consequently, ethanol is essentially limited to 10 percent of the gasoline supply. This is commonly referred to as the 

blend wall. 

The current gasoline usage in the United States is approximately 

140 billion gallons annually. Ten percent of that is 14 billion gallons. However, it is not realistic to penetrate every single gallon, 

so experts predict the blend wall to be around 12.5 billion gallons. 

We expect to crash into this wall sometime in 2009, if not before. 

Flex fuel vehicles along with higher blends of ethanol is certainly 

a big part of the long-term solution, but this will take several years 

to accomplish. To continue on the path of reducing our dependence 

on foreign oil, higher blends of ethanol are needed today. If the ethanol market is allowed to expand, investors will have the confidence they need to continue to invest in cellulosic ethanol production. Without higher blends, there is literally no place for any additional ethanol to go, which will threaten the development of the 

commercial cellulosic ethanol industry. We must move beyond E10 

to achieve energy security. 

Additionally, there has been much recent reduction on removing 

the tariff on Brazilian ethanol. If foreign ethanol were allowed to 

enter this country without a tariff as the U.S. ethanol industry is 

approaching the blend wall, the goal for energy independence will 

be set back decades. The U.S. biofuels industry will be crushed. Investment has already slowed down considerably due to the blend 

wall. With tariff-free Brazilian ethanol entering our country, investment will cease, and this will apply to not only grain-based ethanol, but cellulosic ethanol development, as well. 

Additionally, if the tariff were to be dropped, the U.S. taxpayer 

would actually be subsidizing Brazilian ethanol because its use 

would be subject to the blenders tax credit just the same as U.S.- 

produced ethanol. Protecting U.S. production and modeling portions of Brazilian ethanol policy seems more reasonable. 

POET is one of the leading developers of cellulosic technology. 

We have invested tens of millions of dollars in cellulosic research 

and are prepared to invest hundreds of millions more to make this 

a reality. The commercialization of cellulosic ethanol is not far off. 

POET announced last week it will be producing cellulosic ethanol 

at our pilot scale facility later this year in Scotland, South Dakota. 

9 

Construction of our commercial-scale facility in Emmitsburg, 

Iowa, is scheduled to begin in 2009. The plant is expected to commence commercial production in 2011. But if we are suddenly faced 

with an influx of Brazilian ethanol in our market while we are simultaneously running into an ethanol blend wall, we will not be 

able to see this dream become a reality, nor will the many others 

who are diligently working on this process. 

If we truly wish to see a change in our nation’s transportation 

fuel supply, we need to do the following. We need to create a larger 

market for ethanol by allowing higher blends in today’s vehicle 

fleet. The 10 percent blend wall will stop investment in both grainbased and cellulosic-based ethanol. It is critical that the EPA approve a rate greater than 10 percent ethanol before year-end 2009. 

We need to mandate that all new vehicles are flex fuel. It takes 

17 years to convert our automobile fleet. It is a minimal cost to 

make a new car flex fuel and we should not delay this any longer. 

We should incentivize the installation of blender pumps throughout the nation. Blender pumps give the consumer the choice of 

multiple ethanol blends. We need to allow the American consumers 

to choose his or her fuel blend based on performance and price. 

We need to support cellulosic ethanol development. The recent 

farm bill has three important provisions that will help, which 

USDA needs to implement on a timely basis. They are loan guarantees; repowering; harvesting, storage, and transportation. 

And finally, we need to focus on a U.S. solution. The natural resources are available. It is important we continue to support the 

upstart biofuels industry. Today’s grain-based ethanol industry is 

the foundation for cellulosic ethanol. The tax credit and tariff are 

critical pieces of legislation that will allow the nation’s energy potential to be fully realized. The U.S. ethanol industry has demonstrated in the past that we can meet the challenge and we stand 

by ready to do so in the future. Make no mistake. This problem is 

solvable in the United States. The natural resources, ingenuity, 

and technology are all right here. We simply need our nation’s will. 

Thank you for the opportunity to testify today. On behalf of 

POET and the entire renewable fuels industry, we thank you for 

the past legislation that is truly making a difference in the nation’s 

energy supply and POET looks forward to working in partnership 

with Congress and the administration to reach the national goal of 

36 billion gallons by 2022. 

[The prepared statement of Mr. Lautt can be found on page 82 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Lautt, for a very 

good statement, very provocative, I think, in laying out where we 

are and where we might be headed. 

Now we will turn to Mr. Dave Moody, the current President of 

the Iowa Pork Producers Association. He has been involved with 

the Association for the past 15 years. Mr. Moody has been involved 

in pork production for nearly 40 years and currently manages H&K 

Enterprise, a farrow-to-finish business. He farms over 1,000 acres 

of corn and soybeans at his farm near Nevada, Iowa. 

Mr. Moody, thanks for being here. 

10 

STATEMENT OF DAVID MOODY, PRESIDENT, IOWA PORK 

PRODUCERS ASSOCIATION, CLIVE, IOWA 

Mr. MOODY. Thank you for the invitation to this hearing today. 

As the Senator has just said, I am Dave Moody, President of Iowa 

Pork Producers Association and a producer from Nevada, Iowa. 

We have all heard about the perfect storm and many in agriculture are being forced to respond to issues well beyond their control. We are at an important crossroads in American agriculture 

where we must work cooperatively to produce food, feed, and fuel 

simultaneously. Just last week, the USDA released the August crop 

report and it appears that conditions of the crop have greatly improved over previous months. During the next few weeks, farmers 

will begin to focus on weather conditions to mature the crop and 

hope that we don’t see an early frost this year. 

As you will learn from other speakers, these demand and supply 

issues will persist for several years as we work through these 

changes. This year’s demand-supply situation has resulted in dramatic and rapid changes in commodity prices. For example, we 

have seen record prices for cattle and hogs this summer, but many 

livestock farmers still have not been able to break even because of 

rising input costs. As a farmer myself, this same fear of input cost 

inflation will possibly and probably affect the grain farming in the 

next couple of years. 

Earlier this summer, corn reached $7 a bushel. However, it has 

dropped nearly $3 at this point in time. This rapid increase and decrease has resulted in tremendous stress among farmers, lenders, 

grain merchandisers, and consumers and others. To say that this 

year has been a wild rodeo in agriculture is definitely an understatement. 

As we move forward, we need to look at these. The demand-supply issues for row crops has highlighted needs to balance important 

end use of the crops. Causes of tight supplies include cold, wet 

springs, delayed crop progress, flooding, weak dollar, and high energy costs. As margins for livestock and ethanol production has 

eroded, we must look for new approaches to improve efficiencies. 

While we may have averted disaster this year that it was looking 

like in mid-June, we need to look at policy options for the future. 

One of the most encouraging may be corn fractionation for ethanol 

production. Fractionation is the high-speed separation of the corn 

kernel into four basic components so the parts can be used more 

efficiently. It is currently very expensive to implement this fractionation at ethanol plants and we want to help develop and support the adoption of this new technology. Congress should begin by 

investing in different approaches and demonstrations and then let 

the industry adopt the technology that shows the greatest promise. 

Frankly, the technology in the short term may be more effective 

than cellulosic ethanol. 

We believe this presents the whole agricultural community and 

the Nation a win-win opportunity. When used in ethanol production, it reduces energy consumption, reduces transportation costs of 

the co-products, reduces water consumption, it increases ethanol 

production, and it helps to create a greater number of high-quality 

co-products that the livestock industry may use. 

11 

We must also work and support research institutions in ongoing 

scientific feed trials to ensure co-products can be used in our feeding rations accurately and the feed value can be publicly documented. As new co-products are created, feed documentation will 

continue to need support regardless of what type of livestock is 

being fed. 

Other policy options—many other approaches have been discussed, such as early release of CRP. I want to thank all the Senators who have supported you, Chairman Harkin and Senator 

Grassley from Iowa, for supporting the early release of the CRP 

acres for grazing and hay. 

Also, the preventative planning dates and crop insurance adjustments need to be reviewed to make sure that when we have incidents like we had this summer, that we get some sort of crop planted on these acres that get flooded out. 

And finally, the Texas waiver for the EPA request has now been 

decided. It is behind us, and other panelists today can discuss the 

decision in greater detail. 

In summary, Congress can take great steps forward by investing 

in projects and policies that will more efficiently produce food, feed, 

and fuel simultaneously. Thank you. 

[The prepared statement of Mr. Moody can be found on page 90 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Moody. 

I would now yield to Senator Nelson for the purposes of a couple 

of introductions. 

Senator NELSON. Well, thank you, Chairman Harkin. It is my 

pleasure to introduce Mr. Jim Jenkins today, who is the Chairman 

of the Governor-appointed Nebraska Ethanol Board, which is a 

State agency devoted to the development of our ethanol industry in 

Nebraska. He also is a range-to-restaurant beef producer and 

comes from Callaway, Nebraska, and is no stranger to the issue 

from the standpoint of feed as well as fuel. So Jim? 

STATEMENT OF JIM JENKINS, CHAIRMAN, NEBRASKA 

ETHANOL BOARD, CALLAWAY, NEBRASKA 

Mr. JENKINS. Thank you. Thank you, Chairman Harkin, Senator 

Nelson. I, too, am honored to be a part of this discussion on this 

panel and certainly, as you have just outlined my background, I 

find myself squarely in the middle of these issues. I think this is 

one of the most—since moving back to my family ranching operation in 1996 and actually having participated in agriculture for 

over 30 years, I believe this is probably one of the most exciting 

times that I have witnessed. We have a lot of challenging things, 

but a lot of opportunities that have come about as a result of the 

biofuel revolution in this country. 

I agree with you, Senator Nelson. What we need to do is get to 

the facts. There is a lot of emotion. People have lined up and drawn 

lines in the sand and I really am trying to encourage all of my 

friends on both the livestock side, the corn side, to sit down and 

try to work through some of these issues. 

It seems to me that as I look back over the last 30 years in agriculture, the principal challenge we have faced is we have had too 

much food. We have had stagnant commodity prices. We have had 

12 

large subsidies going to farmers from the taxpayer. When I moved 

back to the ranch in 1996, my friends on the East and West Coast 

were telling me that they were upset because farms were being 

subsidized. Our international trading partners were accusing us of 

dumping cheap grains onto the market. 

We roll forward now ten or 11 years later and we have a little 

bounce up in commodity prices, and now, of course, the food for fuel 

criticism is coming out, and despite the fact that oil has gone up 

900 percent from its low point seven or 8 years ago, 9 years ago, 

and grain, corn has gone up around 300 percent, and commodity 

prices are still from an inflation-adjusted level extremely competitive and actually fairly inexpensive, we are, I believe, paying less 

than 10 percent—each consumer is utilizing less than 10 percent 

of their budget for food, we are facing this food for fuel criticism. 

The other thing that I think that people need to understand is 

that only 19 cents out of every dollar goes to the farmer, so it is 

a long way from the farmgate to the consumer plate, and I know 

that as a restaurant operator. I know that as a rancher. The plain 

fact of the matter is where I am getting killed both as a restaurant 

operator and a rancher is high oil prices. Energy is absolutely hammering us. 

And I am appreciative of the fact that what we are finally doing 

in agriculture is we are doing two principle things. Because of ethanol, we are diversifying our fuel or our energy portfolio, which is 

something that we are all advised to do in our financial portfolios. 

And second, we have diversified our farm economy and finally got 

out of the rut of $2 corn prices, which by the way are no panacea 

for the cattle feeding industry. 

Now, I can’t speak for the pork guys or the poultry people. I 

know they are facing some unique challenges. But the plain fact of 

the matter is the byproduct, co-product, distillers grains that are 

available to cattle feeders, basically we are able to, as most people 

in this room know, use nearly 50 percent of the grain, a bushel of 

grain that is used in the ethanol process comes back as a feed 

source. 

Beyond that, I think it is important to understand why $2 grain 

is hard, bad, for the livestock industry. With $2 grain, we face an 

over-fattening of cattle, and I see this particularly in the restaurant industry. If you look at the No. 1 complaint that retailers 

and restaurant operators have, it is that for decades, we have had 

to trim huge quantities of fat off our animals. Now the good news 

is that because you can fatten cattle to a large degree on forage— 

80, 85 percent of their intake can come from forage—you end up 

now moving to more innovative grazing practices and forage usage 

practices that have really not been talked about to date. 

For example, on my ranch, I am running 20 to 25 percent more 

pounds per acre than my father was running. Why? Because I have 

adopted what I call progressive or more modern grazing practices. 

We have been able to put more water on the ranch. We have used 

rotational grazing. The plain fact of the matter is, here in Nebraska, we have 50 percent of our lands in grass, and with $2 corn, 

there was not a lot of incentive to really manage those grasslands 

very well. I am not saying we were being bad stewards. I am suggesting to you there is a tremendous amount of innovation that has 

13 

come from using those grasslands and what happens is using those 

grasslands more appropriately. 

Right now, I would estimate that probably less than 10 percent 

of ranchers and farmers in Nebraska are fully implementing some 

of the grazing techniques that would allow for more forage and less 

corn. So in addition to being able to use that foodstock coming out 

of an ethanol plant, 50 percent of it, we are also, I believe, able to 

go out and more efficiently use the corn stock residues, crop residues, and grazing lands. 

Some other points I would like to make are that we need to let 

the marketplace work. Right now, the marketplace is currently signaling to cattle producers, feedlot operators, do not bring me that 

livestock when it is 500 pounds. We do not want that beef animal 

until it is 800 to 900 pounds, getting paid a premium for 800– 

pound animals. So we have a great opportunity to watch this market work. 

We have seen it go from $7 down to $5, as has been indicated 

earlier. What I would say is that let us not panic. I know when we 

hit $7 corn, believe me, I was panicking. I had 1,000 head of yearlings out there that I thought the price might get caved in on. The 

fact of the matter is, the market is working. 

The final point I would like to make is that there has been a lot 

of criticism of ethanol for being subsidized. Well, I think if we look 

back at history, we can find that—we can see that this country is 

made great for a couple of reasons. One, the free market has been 

in full force. 

Second, we have had democratic institutions that have had the 

flexibility and the vision and the insight to partner with the free 

enterprise system. Look at transportation, all the key sectors, the 

Transcontinental Railroad that Abe Lincoln sent through to allow 

us to get products to market. Our educational system, whether it 

be land grant universities doing research for agriculture, energy, 

technology through our Defense Department and our space program. So the notion that we should not subsidize or help, at least 

initially provide a foundation and infrastructure for energy to me 

does not live up to our history as a nation. What we need to do is 

have the vision to understand that we can work together through 

the public and private sector to build a biofuel industry that diversifies that energy portfolio, and just as importantly, puts a strong 

foundation under agriculture. 

We do need to be concerned about making sure that livestock 

producers are not critically hurt if there is a severe drought or 

other factors that might come in, so I would suggest as a final comment that you folks consider, the Congress consider looking at 

ways to mitigate major problems created by drought. 

I am very appreciative of being a part of this discussion and look 

forward to hearing the other remarks from the panel. Thank you. 

[The prepared statement of Mr. Jenkins can be found on page 71 

in the appendix.] 

Chairman HARKIN. That was very good. 

Senator NELSON. Well, thank you very much, Jim. 

It is now my pleasure to introduce Mr. Bill Lapp, who is the 

Principal of Advanced Economic Solutions of Omaha, providing economic and commodity analysis to agribusiness and food companies. 

14 

He is also a Director of the Kansas City Board of Trade and serves 

on the Board of the Farm Foundation in the Kansas City Federal 

Reserve Board Center for the Study of Rural America. He has over 

25 years of experience in analyzing and forecasting economic conditions and commodity markets. I know he is going to tell us how we 

get out of the conundrum we find ourselves in. Bill? 

STATEMENT OF BILL LAPP, PRINCIPAL, ADVANCED 

ECONOMIC SOLUTIONS, OMAHA, NEBRASKA 

Mr. LAPP. Mr. Chairman, Senator Nelson, it is a pleasure to have 

you here in Omaha, my home town, for this hearing. We are glad 

to be able to facilitate this for you. As you mentioned, I am the 

Principal of Advanced Economic Solutions. We provide economic 

and commodity analysis for a broad array of food companies, and 

with my background, I hope to give you the perspective of food 

manufacturers, restaurants, and primary input producers. 

Between 1981 and 2006, spikes in commodity prices have been 

mostly weather-related. In all cases, these increases in prices have 

been short-lived and with limited impact upon consumer food inflation. For the most part, the increases in commodity prices have 

been absorbed by food manufacturers to avoid a loss of market 

share, and this contrasts directly with the current environment of 

sustained increases in commodity prices. Today, food manufacturers are unable to absorb the sharp increase in input costs, and as 

a result, food price inflation has begun to accelerate and the rates 

of food inflation are likely to continue to increase in the coming 

years. 

The overwhelming majority of companies that my firm works 

with indicate that rising input costs driven by the surge in commodity prices has created the most difficult and challenging environment from a raw material cost perspective that they have faced 

in more than 20 years. The current environment, with sharp and 

sustained input costs, has created significant pressure on margins 

and is compelling the food industry to raise prices to consumers. 

The Bureau of Labor Statistics data on food prices confirm the 

trend in rising costs to the consumer as well as the producer. Historically, the Consumer Price Index for food increased by an average annual rate of 2.3 percent between 1998 and 2006 and has not 

been in excess of 6 percent since 1980. However, the impact of 

higher commodity prices is beginning to translate into higher consumer prices, and in 2007, the CPI for food rose by 4.9 percent, and 

thus far in 2008, the CPI for food has increased at an annualized 

rate of 7.6 percent. This includes double-digit rates of inflation for 

staples such as bread, cereal, salad dressing, rice, and eggs. 

A couple things to know. First of all, the Producer Price Index 

for food has increased at an even greater rate, near 10 percent this 

year. And the second point I would make is that consumer price 

for proteins, for meat prices, has only been modest. This is consistent—the Consumer Price Index data from the Bureau of Labor 

Statistics is consistent with the American Farm Bureau Federation’s survey of supermarket prices, and that shows that the five 

meat prices they track have increased only 1.7 percent from a year 

ago. 

15 

Due to the biological limitations in the livestock industry as well 

as high levels of fixed costs, livestock producers do not typically respond quickly to changes in feed costs. They are incapable of doing 

so. However, in the current environment, which is characterized by 

very poor and negative margins, producers are expected to reduce 

their output. The USDA’s most recent forecast is for total meat and 

poultry production to actually decline in 2009 by 1.2 percent, a development that they believe will lead to higher livestock prices and 

ultimately higher prices for the consumers. 

Earlier this year, Advanced Economic Solutions completed an 

analysis of the outlook for food inflation for the next 5 years, 2008 

through 2012, and I might note that this is an update of a study 

originally completed at the request of the National Corn Growers 

Association. In that study, Advanced Economic Solutions estimates 

that consumer food inflation will increase by an average rate of 9 

percent between 2008 and 2012 as the rising costs are passed on 

ultimately to the consumer. 

I might mention a few things about ethanol and the relationship 

to corn and food prices, and there have been many studies and it 

is a tough subject to get your hands around. So I thought I would 

run through just a few facts. 

While there has been discussion of the impact of poor weather in 

recent years, the reality is, as USDA data suggests, we have had 

above-trend or trend yields. In 2006–007, yields were 4 percent 

above the previous 5 years, and 2007–008, world yields were again 

above the 5–year average. In other words, it is difficult from a statistical point of view to blame the weather for the dramatic rise in 

prices we have seen in recent years. 

A second fact is that the world wheat and coarse grain usage 

forecasts by the USDA is expected to increase 3.3 percent between 

2006–007 and 2008–009, so a 2–year gain on an annualized basis 

of 3.3 percent. This is well above the rate during the previous 10 

years of 1.2 percent and higher than the average yield we would 

see in the past 25 years. 

The growth in this use of world wheat and coarse grain is dominated by ethanol. During that 2–year period, ethanol production in 

the U.S. using corn will account for 46 percent of the growth in demand. As the U.S. and the world struggles with tight stocks, high 

feed costs, and increased food inflation, we should keep in mind 

that nearly half the growth in grain use worldwide for wheat and 

coarse grains can be attributed directly to the mandated use of 

corn to produce ethanol. 

A third fact I might mention is that the growth in use of grains 

has led world stocks of wheat and coarse grain to the lowest levels 

on record, and this has occurred in spite of high record prices for 

grain and oil seeds. 

At present and in the foreseeable future, the impact of a decline 

in yields, such as we were threatening to do earlier this year, 

would be dramatic for grain and oil seeds prices and ultimately for 

consumer prices. 

Another fact I might mention is that more acreage will be needed. We need more acreage here produced in the U.S., and particularly due to the demand mandated by the Renewable Fuels Standard. In the United States, just to meet existing demand for wheat, 

16 

corn, soybeans, and cotton, plus the mandated growth in ethanol, 

U.S. farmers will need to plant an additional five million acres of 

major crops in 2009. Grain and oil seed prices are already high, but 

a shortfall in acreage or yields in 2009 would drive prices dramatically higher. 

And finally, let me mention that livestock margins have been extremely poor due to the increase in feed costs. When corn prices 

were over $8, or near $8, I should say, in late June, the pork industry, the cattle feeders, and the broiler producers were losing, in my 

estimate, roughly $8 billion on an annualized basis, which is more 

than the U.S. airline industry was projected to lose this year. 

USDA analysts suggest that livestock producers will reduce output by 1.2 percent in 2009, with prices for livestock expected to increase. And while there have been limited gains in consumer prices 

of protein to date, the reduced availability of meat will ultimately 

be reflected in higher consumer prices at some point probably in 

2009. 

Thank you, Mr. Chairman and Senator Nelson, for the opportunity and I look forward to your questions. 

[The prepared statement of Mr. Lapp can be found on page 74 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Lapp. 

And now for our wrap-up witness, we go to Mr. Tim Recker, 

President of the Iowa Corn Growers Association. He produces corn 

and soybeans near Arlington in Fayette County, Iowa. His testimony here today is on behalf of the Iowa, Nebraska, and National 

Corn Growers Associations, which have worked so hard to promote 

the use of renewable fuels. 

Mr. Recker, welcome again to the committee. 

STATEMENT OF TIM RECKER, PRESIDENT, IOWA CORN 

GROWERS ASSOCIATION, AND FARMER, ARLINGTON, IOWA 

Mr. RECKER. Thank you, Chairman Harkin, Senator Nelson. 

Thanks for the opportunity to comment on the food and fuel debate. As Senator Harkin said, I am Tim Recker, President of the 

Iowa Corn Growers, and I am speaking on behalf of 59,000 corn 

growers who are represented by the Iowa Corn Growers, the Nebraska Corn Growers, the Nebraska Corn Board, and the National 

Corn Growers Association. 

Over 30 years ago, corn farmers saw ethanol’s potential to benefit producers and consumers. Our check-offs have spent millions 

of dollars on ethanol research, education, and market development, 

and our growers know we have contributed endless hours to promote policies that would give ethanol a chance, because given a 

chance, we knew ethanol would succeed. 

Today, producers and consumers are benefiting from the hard 

work corn farmers are producing for the marketplace and the market is working. We are a long way away from the huge government-owned stockpiles of grain of the mid–1980’s, and even the 

USDA subsidies couldn’t halt the exodus of farmers and the wave 

of bank closings. Today, the world is hungry for protein and petroleum and our corn growers can deliver both—energy from ethanol 

and protein from corn-fed livestock. 

17 

Our ethanol industry is still developing, but is already producing 

jobs that keep young people in our communities. It is improving the 

tax base that supports local schools and government services. And 

it is pumping renewed economic life into small towns and prompting new business. 

And what about consumers? While high oil prices are limiting 

family vacations because the dollars just don’t stretch, ethanol is 

reducing the pressure on family budgets. 

Using ethanol increases our overall energy supply. Ethanol in an 

E10 blend means for every ten gallons of gasoline that you pump, 

there are 11 gallons of fuel at the pump. In E85, or putting E85 

in a flex-fuel vehicle, for every three gallons of gasoline, you have 

20 gallons at the pump. 

My written testimony cites economic analyses that demonstrate 

what I am saying, but I will just point out that Midwestern consumers now save about 45 cents out of every gallon of fuel because 

ethanol is in the marketplace. 

In retrospect, the Renewable Fuels Standard is as good for U.S. 

consumers as it is for corn growers. Not surprisingly, though, some 

interest groups want to roll back the RFS and other key policies, 

such as the blenders credit and the ethanol tariff. 

We have seen unprecedented efforts this year to spread 

disinformation about ethanol, and unfortunately, some people are 

buying into the false claims. Today, I would like to set the record 

straight. 

Despite what alarmists have claimed, USDA’s August 12 production report projects the second-largest U.S. corn crop ever. The 

world agriculture supply and demand estimates project greater carryover stocks at both the national and at the international level. 

USDA puts the average farmgate price in this current market year 

somewhere in that $4.25 and projects an average price between 

$4.90 and $5.90 next year. 

Our industry continues to produce higher yields with less erosion 

and less chemicals. We have gone from 66 bushels an acre 50 years 

ago—and that is a few years before I started farming—to a projected 171 bushels today. We have genetic experts that tell us that 

300–bushel corn is a reality and a realistic target for the foreseeable future. U.S. growers are supplying plenty of corn for both food, 

feed, and fuel uses. 

We know livestock feeders have struggled with the spike in corn 

prices, and it is because I am a hog producer. We want all agriculture to be profitable, but targeting ethanol will not solve livestock’s problem. Many factors have produced these prices, notably 

increased world demand for millions of people who want more 

meat, milk, and protein in their diets, and at the same time feed, 

wheat, and barley supplies have tightened because of crop problems in other countries and the weak U.S. dollar has made it easy 

for foreign customers to continue buying as prices have climbed. 

Changing U.S. ethanol policy won’t change international demand, but it could harm U.S. livestock producers by reducing corn 

for ethanol, since they also use distillers grain in those diets. For 

livestock operations located near ethanol plants, distillers grains 

are a valuable alternative to help manage feed costs. 

18 

Corn growers support the U.S. livestock industry and we work 

with livestock producers in many ways on many issues. We spend 

our checkoff dollars on research to improve feed products and on 

the market development for red meat exports. We want to solve the 

problems that really hurt livestock producers, like the $50 million 

per week that beef producers are losing because of export problems 

in Japan and Korea. 

Ethanol opponents have blamed corn prices for high food prices, 

and many economic studies confirm that other input costs, notably 

high oil prices, are the real culprit to our food increases. In fact, 

most consumers save more on fuel because of ethanol than any 

other corn-related increase in food prices. For an average family, 

their fuel savings from ethanol is estimated to be $1,500 a year. 

That is because the share of the food dollar that goes to all farmers, not just corn farmers, is now below 20 cents. 

Look at corn’s role in specific foods. Four-dollar corn contributes 

just 13 cents to the cost of a gallon of milk, 18 cents to a quarterpounder, 28 cents of corn in a dozen eggs, and 31 cents of corn in 

a one-pound Iowa pork chop. A bowl of corn flakes and milk for 

breakfast contains less than two cents’ worth of corn. 

We are supplying enough corn for food, feed, and fuel. U.S. and 

world consumers are better off because of ethanol and we ask Congress to maintain the RFS, the ethanol tariff, and the blenders 

credit. 

And I might add just as a personal note that the RFS is bigger 

than all of us livestock industry. It is bigger than corn. It is bigger 

than livestock. It is a road map for the United States, the future 

of energy independence, and we encourage you to support it. Thank 

you. 

[The prepared statement of Mr. Recker can be found on page 99 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Recker. Thank 

you all very much for very succinct and very pointed statements. 

I would like to open it up for a general discussion, to have more 

of a discussion than questions or anything like that. We might 

have some specific questions for certain individuals, but I think I 

would like to just start by picking up on where Mr. Recker just left 

off because it is the one thing that is out there that we have been 

wrestling with on our committee, and I hear it all the time in the 

halls of Congress, and that is that with these food prices going up, 

the ethanol is just sucking up all that corn and is causing all these 

prices to go up. All of you in a way addressed that question to some 

extent. I would like to examine it a little bit further. 

We do have some statistical data on this, as I think Dr. Babcock 

knows. We do have some statistical basis on which to go. And then 

there is kind of people’s generalized conceptions out there. For example, I was looking at my notes here. Mr. Jenkins, I was reading 

your testimony—no, no, it was Mr. Lapp. I am sorry. You had a 

survey in which ninety percent of those surveyed said that 90 percent of the ethanol was the primary driver of the food price rise. 

Well, from what I am hearing, that is not so. That just seems to 

be based on opinion and there seems to be a lot of PR. There has 

been a lot of PR out there by the grocery manufacturers and the 

19 

oil companies and others to instill that thought out there, that so 

much of this is driven by ethanol. 

I want to know what the facts are. And again, from your knowledge base, No. 1, what is the biggest driver of food price increases 

now, and what is the role of ethanol? Where does ethanol come in? 

Is there a percentage figure? Is it small? Is it large? About where 

is it? I will just go down the pike. Do you understand what I am 

saying? In your opinion, what is the biggest driver of food price increases and what part does ethanol play in that? Dr. Babcock? 

Mr. BABCOCK. Well, that is a very hard question to answer, of 

course, but high energy prices have affected every segment of the 

economy and food is no different. Food is a fairly intensive energy 

user and it is a lot of transportation costs embodied in food. So 

clearly, higher energy prices have led to higher food prices. 

Ethanol, the expansion of the ethanol industry also has impacted 

the overall level of ingredient costs to the food manufacturers. 

There is no doubt about it. And it doesn’t come from the direct effect only. It also comes from indirect effects in terms of competition 

for land, in terms of almost the knowledge of needing more corn 

in the future leads to higher prices today to make sure that we allocate the current supplies of corn through the future. 

And I fully expect continuation of the RFS. I agree with Mr. 

Lapp that in the next few years, we will see meat prices and dairy 

prices increase because of higher feed costs. Those higher feed costs 

are driven primarily by expansion of ethanol. 

So if you want a percentage change, probably to date, energy 

prices have been the No. 1 contributor to higher food prices. I 

would expect if we see stabilized energy that in the future, as we 

work through the higher feed costs through our dairy, our livestock 

industry, we are going to see ethanol become a larger—or feed 

costs become a larger contributor, and ethanol, like I said in my 

testimony, is the primary determinant now of feed costs. 

Chairman HARKIN. Anybody else? I didn’t mean to go down the 

row, so if anybody else wants to speak to this, just indicate. 

Mr. LAUTT. Mr. Chairman, I agree with Mr. Babcock that it is 

a difficult thing to pick a number on. Our organization looks at a 

lot of the different studies that come out from the different universities and private industries that are trying to do the economic 

modeling of the impact as well as looking at the different studies 

that come out from the different government sections, as well, and 

we assess their assumptions they use in their modeling to make 

sure if we agree with it, does it make sense, since they drive the 

results. 

The one that we thought made a lot of sense was the one that 

came out from the Economic Advisors for the President’s Office 

which cited that recently, 3 percent of the overall rise in recent 

food prices is associated to ethanol’s impact on corn prices. So it is, 

again, transportation costs the large driver. Corn has had some impact, but I think it is much more minimal than a lot of people have 

attributed to. 

Chairman HARKIN. Again, if you don’t want to address yourself 

to that, you don’t have to, but——— 

Mr. MOODY. Well, as I stated in my comments, we have kind of 

faced the perfect storm. I mean, there have been a lot of things 

20 

come at the market and supplies that have caused prices to rise. 

But indeed, as Dr. Babcock indicated, as feed prices have risen for 

the protein products that consumers eat, they will be rising down 

the road and that is—to date, it has been very minimal of ethanol’s 

impact on food prices, I believe. But there will be more because of 

that feed cost rise in 2009. 

Chairman HARKIN. Well, the one thing I also want to throw out 

here on the table is, OK, so what I have heard from three so far, 

or two anyway, is the possibility of increases because of the increased demand for more grains for fuel production. But are we 

missing a point here? I think Mr. Recker talked about increased 

productivity, and on the next panel we are going to have some people talk about that, but you are all in this business. What about 

it? Ten, 15 years ago, if someone told me we were going to produce 

150 bushels an acre, I would have said, it is impossible. Now, we 

are at 200, roughly, more and booming up. As you pointed out, DuPont and others are saying 300 bushels. We will breeze past that 

soon. 

So not only increased productivity, but new hybrids are getting 

more mature in a shorter span of time. We have shorter growing 

seasons. Because of climate change or whatever else is happening 

out there, we are getting corn crops in Southern Canada like we 

used to get in Iowa. Are we taking that into account, increased productivity? 

Mr. MOODY. I think that is certainly, definitely a help. One of the 

factors is the time line here. If this time line was a little longer, 

everyone would have been able to have a chance to adjust. But we 

are trying to make this all happen—and we are not trying. It has 

all happened in a very, very short time period and livestock producers, as indicated earlier by one of the gentlemen to my left here, 

don’t make that quick change. I mean, it takes just—you physically 

can’t when you are dealing with another living body, that you can’t 

make that immediate change. And that is part of the big factor 

that has affected the livestock industry, is that this has been such 

a dramatic, quick change. 

Chairman HARKIN. Mr. Jenkins? 

Mr. JENKINS. I think one of the simpler question is whether we want to go back to $2 corn. You know, is that good for the base 

foundation of agriculture? Is it good for our country? Is a cheap 

food policy, which is what we have put in place through taxpayer 

subsidies, is that really the way we want to go? For 30 years, livestock producers have had subsidized grain, and as I stated earlier, 

the downside of that, it leads to very inefficient feeding practices. 

Now, are we going to make the change quickly? No, but I can see 

already, living right there in a rural community, engaged in buying 

food in my restaurants, producing cattle and also producing corn, 

that there is much innovation that is beginning to happen. We 

have got farmers up in Custer County now putting in drip irrigation systems. Now, they are very expensive, but with the new crop 

prices, they are able to do that. We have no-till or minimum-till or 

low-till starting to now sweep the State. It has incrementally come 

into the State for the last 20 or 30 years, but nowhere to the degree 

that we have seen it now that fuel prices, oil prices, have surged. 

Diesel is up well over $4. 

21 

So we can go back to cheap food. I am just not sure cheap food is a great long-term policy. The fact that we could ship $2 grain 

overseas and have them add value to their agriculture while we 

end up with a subsidized farm economy, I don’t think is a great solution, either. 

Chairman HARKIN. Mr. Lapp? 

Mr. LAPP. Chairman, I guess I am looking forward to the comments in the second panel on productivity because I know that the 

USDA put out a study about slowing productivity, and I think Dr. 

Babcock indicated that there is some slowdown in at least the investment to get there. So productivity has been slow and that is 

a problem, because I look at 25 years of data on yields for world 

wheat and coarse grains and they are increasing 1.6 percent no 

matter what decade you look at, and whether events increase and 

decrease that, but over time. 

Since 2002, we have had a number of impetuses for us to move higher. We are not going back to $2 corn. The world economy has 

been growing. It is probably the most rapid decade of economic 

growth we have experienced in history. We have an extremely 

weak dollar. China has evolved as a major force. Energy prices 

have had their impacts, and there has been some impact from 

biofuels. 

If you look at 2002 to 2006, the impact of biofuels has been much 

more limited than it has been in the last few years, and as I mentioned, nearly half of total world wheat and coarse grain usage 

from 2006 to 2008 will be strictly for the use of ethanol. So it has 

changed. 

And I have some ideas of how this impacts the other crops and 

inflation and the specific one I will bring to mind is that if you are 

growing more corn, unless you can find acres of another crop, and 

perhaps some from the CRP if there were a change in policy there, 

you have to steal it from another crop, and the challenge there is 

you enter an acreage battle. 

In the fall of 2006, that became very evident. I have the dubious 

distinction of going to a livestock producer in September of 2006 

and telling them that because we don’t have enough acreage, corn 

might reach $3. I was only off by half, which is more accurate than 

some of my forecasts. But the idea that we need more acreage for 

all these crops because demand worldwide is growing 3.3 percent 

a year and our yields only increase at present roughly less than 2 

percent presents us with a battle and has put us at liability of having sharp increases. 

Ethanol has certainly played a big role, and the fact that corn 

impacts the acreage of wheat and soybean oil and edible beans and 

other crops used to produce food has a dramatic impact. 

Chairman HARKIN. Let me just ask, and I want to yield to Senator Nelson, but I just wanted to pick up on that. I was looking 

again at your testimony and listening to you, Mr. Lapp. You said 

that, basically—let me get the figures here—3.3 percent annual 

growth between 2006 and 2007, and 2008 and 2009, so you are 

talking about a 2–year period——— 

Mr. LAUTT. Two years——— 

Chairman HARKIN [continuing]. We have had an increase in 

usage of wheat and coarse grain worldwide of 3.3 percent. But then 

22 

you say the average increase in yields per acre—listen to this—of 

1.58 percent over the past 25 years. So you have used 3.3 percent 

for the increase in demand over 2 years——— 

Mr. LAPP. Yes. 

Chairman HARKIN.—1.58 percent increase in yields over the last 

25 years. Is that a good way to look at it? 

Mr. LAPP. You mean in terms of the time disparity there? 

Chairman HARKIN. Yes, the time disparity. That is what I 

am——— 

Mr. LAPP. Sure. I think looking forward, at that time, when I initially did that research, but 2009 and beyond, what should be our 

expectation for increasing——— 

Chairman HARKIN. Well, I’m wondering, what has been the 

growth in productivity not in the last 25 years, but in the last 10 

years, 5 years? What has been the growth in productivity? I don’t 

know. I am asking that. 

Mr. LAPP. Decade by decade, it has been similar. 

Chairman HARKIN. About 1.5 percent? 

Mr. LAPP. One-and-a-half, 2 percent, depending on which decade. 

Chairman HARKIN. So is this a good way of looking at it? I am 

asking, is this an accurate way to look at this? If the demand for 

coarse grains has gone up over 2 years 3.3 percent but productivity 

has only gone up 1.5 percent, what does that tell us about what 

is happening down the road? Is demand going up more than the 

productivity? 

Mr. RECKER. Senator, maybe I can help answer that. 

Chairman HARKIN. Yes? 

Mr. RECKER. Thirty years ago, farmers said, we know how to 

grow corn and we can grow it very well, but we didn’t have a market for it. Every year, we had burdensome supplies. In the last 2 

years of my farming career, we finally have got a demand for our 

product, and when you are going to see the growth, and what you 

are talking about is growth in the yield on those same acres that 

we planted 10 years ago, the double-digit kind of growth, is the 

technology we have in the bag that we have just begun to start tapping into that has been on the shelves of seed companies for many 

years until we are able to afford it. 

And the technology that is in the seat in the tractor cab and the 

combines I drive today, being able to put nutrients with sub-inch 

accuracy and technology, now that we have a demand for the product, don’t underestimate the Midwest corn grower from being able 

to over-produce the market and actually over-produce himself into 

an unprofitable situation again. 

Chairman HARKIN. Senator Nelson? 

Senator NELSON. Thank you, Mr. Chairman. 

To try to understand what impact, let us say, the foreign markets of demand for product has, there seems to be some misconception about what feed corn is, that this somehow is going to be supplied to the rest of the world directly for food as opposed to feed. 

Is the fact that the rest of the world is picking up so that you 

see an increase in many areas, whether it is China or India or 

some of the developing countries, where there is now a demand for 

product, for protein, that that demand is outstripping supply at the 

moment? In the past, where we were over-producing but still shipVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
23 

ping overseas, weren’t we, in fact, shipping subsidized product to 

various countries and now the countries are, because of demand, 

are paying a price closer to what they should have been paying for 

some period of time? Is that accurate? 

Mr. RECKER. I agree, and I agree, and I agree with everything 

you said. 

Senator NELSON. And so if we look at it that way, then when it 

is good for American agriculture, because we are getting the price 

that we should be getting for profitability, it is unfortunate that 

other parts of the world are having to pay the price, and we can’t 

control that unless we are going to try to control markets over the 

rest of the world sometimes like we have tried to do here at home. 

So unless we do that, we are not going to be able to solve their 

problems by our prices. 

But my question is for you, with our high prices for our exports, 

won’t that stimulate more production in those other parts of the 

world because they can produce it for less than we can? So perhaps 

we are not the ogre that people are trying to make us out for the 

rest of the world. The rest of the world can respond on their own, 

as well. Is that fair, Mr. Lautt? 

Mr. LAUTT. Yes. I think that is dead on. We are seeing foreign 

countries like China, like Brazil, like India, start to respond. For 

example, in China today, their average yield in corn is 78 bushels 

an acre. Why not adopt U.S.-type technologies? Well, there has 

never been an economic incentive to do so. The same thing in 

Brazil. The same thing in all these countries. 

Well, now for the first time, the price of agricultural commodities 

is above the price of production and the cost of production to 

incentivize worldwide change. I think the difficulty is we are in an 

evolution or a paradigm shift not only as a country, but as a globe, 

because this is a global market, and the paradigm shift is mentally 

where, A, commodities can only be used for food and feed. The reality is, we have found that they can also be used for food and feed 

and energy. 

And I can tell you that companies like ours, as well as many others here in the U.S. and abroad, this is just the beginning. There 

are things like nutraceuticals, bio-based materials, chemicals, 

things that consumers buy readily over the shelf today that are a 

byproduct of petroleum will be made from things like corn in the 

future. So this is just the very early stages of what really is an agricultural revolution, where we are going to have multiple demand 

streams for our commodities. 

Senator NELSON. I am a bit puzzled by the concern about ethanol 

using up the feed supply, where between 30, as I have heard testimony here, between 30 and 50 percent of the product was back in 

the form of distillers grain, I guess, or product, for feed. So the 

total use of 30 percent of the corn, if it is that high, or 20 or whatever the percentage of our corn crop is used, you have to factor in 

that number can be reduced by the brand that is created that is 

now available for feed. Is that being ignored, underestimated? 

What are your thoughts about that? 

Mr. JENKINS. I just saw a publication—I won’t mention which 

one—an agriculture publication that made reference to the feed 

usage, and cattle are the No. 1 user of feed corn in the United 

24 

States. It didn’t have that math in there. There is no question that 

distillers grain is being consumed, and I think the accurate number 

is about 40 percent, and when you look at it from an energy perspective, from a food value or feed value, it actually goes up to 50 

percent. So the cattle industry is using that. There is no question. 

That is happening. 

The other thing that Dan Loy at Iowa State University noted in 

a recent interview is that—and he is a beef nutritionist—he said 

that the cattle industry can get by on 40 percent less corn, or they 

can lower the ration. My point is, we talk about acres fighting for 

each other. Drive down I–80 some winter and see how many corn 

stalks are going into an animal. I mean, there are—I would like 

to know, maybe somebody can quantify it, but there are literally 

tens of thousands, probably hundreds of thousands of acres that 

are simply being disked under. 

Terry Klopfenstein at the University of Nebraska has demonstrated that if you put feeder cattle out on corn fields and use 

distillers grain to supplement their diet, you are $45 or $50—and 

I am doing this off the top of my head, but maybe as high as $60 

better off than putting them right into a feed yard. But you have 

to put them out there, fence them. There are some management 

issues. And the great thing about it, the corn stalk nutrition does 

not leave those fields. They have also done research that showed 

the impact on yield over 9 years was zero because those cattle, of 

course, eat the cornstalks and deposit—90 percent of the nutrients 

go back right into it. 

So I think we are missing one of the great opportunities the cattle industry has not to fight with wheat or corn or soybeans, but 

to actually fully utilize crop residues and pasture lands out there 

in a way that we have never used them before. That is one of the 

things that has not been quantified or documented, but it is absolutely happening on my ranch and ranches all around me. 

Senator NELSON. Yes. That may not work quite as well for the 

pork producers——— 

Mr. JENKINS. But it does free up, if I could just say, and boy, I 

am not going to edge out the pork producers here because, really, 

I know you guys are facing a tough challenge. I have got a good 

friend up in Custer County who I have had long talks with about 

this. But what it will do is if the cattle industry can consume significantly less corn, which I think it can—how significant, I don’t 

know, I am not an economist—and fully utilize and leverage those 

distiller grains, it will then free up that corn for the poultry people 

and help us work our way into a new sort of corn-livestock economy. 

Senator NELSON. So maybe help is on the way, Mr. Moody, but 

you need it today, right? 

Mr. MOODY. What is that? 

Senator NELSON. I said, help may be on the way, but you would 

like to have it today. 

Mr. MOODY. Yes, that is—exactly. We needed it a few months 

ago, is when we needed it. But yes. When you start dealing with 

the pork and poultry, you are dealing with a simple stomach rather 

than the ruminant animal that cattle are and you have to have a 

more specific diet, and that is why I spoke about the corn fractionVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
25 

ation to get the parts separated so that we can have a higher-quality product to be able to use. I mean, there is definitely an answer 

in this somewhere that everybody can live with and we just have 

to work together to find that answer. 

There have been issues with trying to feed the distillers coming 

out of the backside the way it is done today with the simple stomach animals. We have got fat quality issues in carcasses if we get 

too much in there, and from plant to plant, there are not the same 

consistencies, which creates problems. You can have a little more 

variation in some of your beef diets, maybe, but when you get in 

with the poultry and the pork, you need to have a pretty specific 

constant diet or you get into problems. And so that is where our 

real challenges have been in trying to use the current byproducts 

or co-products of the ethanol industry. 

Senator NELSON. Well, I think it may be safe to say, and I ask 

it as a question, is it safe to say that paradigm shifts come in a 

variety of different sizes. There are those that take a longer period 

of time to develop. This seems to be one that has come faster and 

some areas of agriculture have been able to adjust as quickly as 

they would prefer. So you get caught in the middle of a paradigm 

shift and you can be left with major challenges to work through 

that over a period of time we will work our way through, but in 

the meantime, there are some challenges that are very hard to 

meet. Is that fair to say? 

Mr. RECKER. I might add that the market is working. The market did work this year. There was a concern of not having enough 

corn and all of a sudden, once we went past that time when we 

knew we were going to have enough corn, the market has plummeted over $2.50. And just to put that in perspective, $2.50 was 

my average selling price for the last 22 years of farming. The market dropped $2.50 in about 40 days. So corn farmers are also facing 

that same paradigm that you talk about. 

Senator NELSON. Well, I think that we really haven’t talked, but 

I suspect the second panel will get into it more, about the second 

generation of biofuels and what that will do in terms of meeting 

the ethanol requirements for the future in America today. Corn is 

not going to be able to, even with technology and with increased 

yields and with everything that we do, is not going to be able to 

meet all those expectations and requirements. That is why we will 

go to the second generation. But it doesn’t have to be at the expense of the first generation, and hopefully we will be able to sort 

out how corn-based ethanol will work in the market, but also continue to be available for feed and also for livestock of all sorts, including poultry. 

Chairman HARKIN. I think Senator Nelson really nailed it when 

he talked about the increased prices here that would lead to better 

production and more production around the world. I mean, that 

would be—rather than low prices, a little higher prices will tend 

to spur that production. I think that is a point that a lot of people 

are really missing. 

I thought I might just expound on that just a little bit. You 

know, people are always talking about, well, other parts of the 

world in terms of their grain production and they are lagging behind. There are really, it seems to me, two reasons for that. One, 

26 

in many of these countries, they have increased their population 

substantially in the last 50 years, huge increases in population. 

But their systems of agriculture are like they were 100 years ago, 

or 150 years ago, or even more. They have not adopted the new 

technologies, the new agriculture practices that will allow their 

productivity to increase. 

Second, in many of these countries that I have traveled in and 

looked at agriculture, one of the biggest drawbacks is the lack of 

infrastructure, roads, simple roads. Farmers are out there. They 

have got tillable land and arable land, but they can’t get it to market because they don’t have an infrastructure. 

So you kind of combine those two things and you can see that 

it is not our problem, it is an internal problem in a lot of those 

countries. And some of those internal problems, we can’t solve. It 

is up to those countries. If they want to make those decisions to 

put in that infrastructure, if they want to make those decisions to 

adopt new practices, new genetics, new hybrids, new tillage practices, they can do that, and we should help them. I have no problem in helping them do that, but it is up to those countries to make 

those decisions. 

Second, the issue of subsidies came up. You talked about that, 

Mr. Jenkins, about subsidies. There is always this problem of the 

market and subsidies, and I think, again, you kind of put your 

point on it, that a lot of times, it does take public support to get 

these to mature. I always think back about when we went from 

horses to automobiles, cars. I am sure a lot of people thought 

horses were just fine. We had been using them for hundreds of 

years, plus those new-fangled cars, they won’t go down those mud 

roads. Horses will. Cars won’t. Well, but then the public came in 

and started building gravel roads and farm-to-market roads and 

paved roads and blacktopped roads and the rest is history. 

Also, talking about subsidies, I challenge anyone here to look and 

see how much the taxpayers of this country have put into subsidies 

for the initial development of and the continual exploration and development of the oil industry and petroleum industry in this country. It dwarfs, dwarfs anything that we are doing in ethanol or ever 

will do in ethanol. I mean, from the very beginning, it was government policies and tax subsidies and everything that enabled the petroleum industry to develop like it did. 

So again, for us to say, well, OK, now we are going to go into 

a new technology, into ethanol, of course, we provide some initial 

input to help get it going. But market forces will take over later 

on and spur it on. So we shouldn’t be too afraid of this. We have 

done this in the past with numerous other things. 

And there are inequalities out there. For example, we have been 

talking about building a pipeline for transporting ethanol. Well, because some of the existing pipelines won’t do it, there are all those 

problems and stuff, but there is an interesting thing in the tax 

code. A publicly traded partnership can get certain tax benefits for 

building oil and gas pipelines. In the tax code, it actually is written 

that they get these tax benefits for the transportation of non-renewable fuels. Why is that there? Why shouldn’t it be there for renewable fuels? 

27 

So Senator Grassley and I worked together. He is Ranking Member on the Finance Committee. And so we changed it and it is in 

the tax extenders package that is now before us, and hopefully we 

will be voting next month to change it so the publicly traded partnerships get the same advantage if they want to build an ethanol 

pipeline as if they want to build an oil pipeline or a gas pipeline. 

Now, with that, I have been told by a couple of companies that 

if they get that, they have got right-of-way, they can begin building 

some ethanol pipelines that will go from Iowa to the East Coast, 

Nebraska, Minnesota, South Dakota. We will begin to pipe that 

stuff. Then it will really be cheap for the consumers back East, 

back in Philadelphia and Boston and New York and New Jersey. 

Then they will be able to have some of this ethanol and they will 

see it tend to reduce their gasoline prices. 

But again, these are the kind of governmental policies that have 

skewed us one way rather than the other, and I think that it’s time 

for us to say, well, we have something here that is home-grown. We 

know we are dwindling in oil resources, and as someone said in 

their testimony, T. Boone Pickens said we can’t drill our way out 

of this problem. We can drill and we can get more oil, no doubt 

about that, but not enough to solve the problem itself. We have got 

to develop new technologies and new types of fuels. 

Last, cellulose. We haven’t talked a lot about cellulose. Now, I 

just read in the paper that POET is starting a new cellulose plant 

in South Dakota. You are doing the one in Emmetsburg where you 

are attaching it onto an existing corn ethanol plant. But in the 

farm bill that Ben and I worked so hard on, we put a lot in there 

to spur cellulose ethanol, both on the bio-refinery side, for loan 

guarantees, and on the production side to help to stimulate farmers 

to grow more cellulosic crops. That means we could be making cellulose ethanol in Georgia and Florida and Louisiana and Alabama 

and Oklahoma and Kansas, Nebraska, the Dakotas, places where 

we can grow trees or where we can grow grasses, switchgrasses 

and miscanthus and other kinds, including prairie grasses. 

I just finished reading a book a little bit ago called The Worst 

Hard Time. I recommend it to anybody. It was written by Egan. It 

is about the dust bowl. He summed it up by saying that for years, 

we have been trying to plant different crops in this area, but really 

the crop that grows the best is what grew there for 12,000 years 

after the glaciers retreated, grasses. They sequester carbon. They 

are perennial. You can graze on it. And you can also harvest it for 

cellulose, and you don’t have dust bowls any longer. 

This could be a great basin of production, from the Canadian border to the panhandle of Texas and that broad swath down there. 

Not all of it. Obviously, some of it is going to be used for wheat 

and corn and other things. But there is a lot that could be used 

if we give the right incentives and the right signals to people. 

So we put a lot in that farm bill to move us in that direction. 

We haven’t talked a lot about cellulose, but maybe that is the next 

panel, too, but you are all interested in this. We have got to call 

this panel to a halt, and I talked too long, but what about cellulose? Isn’t that also going to assist us? The RFS, Renewable 

Fuels Standard, says that we are going to have—we are supposed 

to have 32 billion gallons of the biofuels by 2022, of which—I think 

28 

I am right—no, 36 billion gallons by 2022, of which 21 must be advanced biofuels, leaving 15 for corn-based. 

So what do you think about that whole area of cellulose ethanol 

and what that is going to mean? 

Mr. LAUTT. I will take a stab at that one. That is, again, very 

point on, Mr. Chairman. Again, we talked about paradigm shifts. 

Here is a paradigm shift. Now, there are a number of companies 

focused in this area. Everybody is taking a little bit different approach, which I think is good. Our company is focusing on corn 

cobs. Part of that is we think, let us not reinvent the wheel. Today, 

we have X-number of acres throughout the corn belt. These cobs 

just get sent out the back of a combine. So we are working with 

different equipment manufacturers to collect these cobs in an efficient manner. 

But the paradigm shift is going to become we want the farmer 

to collect those and deliver them to the plant, no different than 

they do the corn today. And so we are working with farmers, we 

are working with agriculture equipment manufacturers, working 

with different universities to understand the impacts to the field. 

And then our team is working on the actual science of processing 

those cobs. 

And so the announcement that you referred to is we have been 

working on the research side in the laboratories. We have made 

some significant gains to the point we are now going to build a 

pilot facility to produce a set of small pilot scale which will then 

get transformed or commercialized at Emmitsburg and be the first 

facility in Iowa. And again, to Senator Nelson’s comments, it is 

going to be integrated with an existing corn-based facility which is 

why the two, generation one and generation two, are very important. 

But without some of these very important incentives, and I applaud you guys on all the hard work on the energy title in the farm 

bill, it would be almost impossible to incentivize companies like us 

to invest, to incentivize producers to harvest the biomass, to collect 

the biomass, to a point to where it gets efficient and it is sustainable, no different than our practices are today of collecting and harvesting corn and transporting it to whether it is elevators or to ethanol producers. 

So it is very viable. I think there will be a number of approaches 

which will be successful, but there are a lot of hurdles and there 

will be a lot of hard work. But with the right signals through policy, which you folks have done for us, I think it is going to keep 

us working hard to get there. 

Chairman HARKIN. Any other views on this at all? 

Mr. LAUTT. And can I make one other comment, please? And that 

is just to show the scope and size. Just from cobs alone in the U.S., 

we can produce an additional at least five billion gallons of ethanol 

just from cobs. You have talked about grasses. We have talked 

about a lot of other things. Just cobs alone, we can make another 

five billion gallons. That is significant. 

Mr. BABCOCK. I just wanted to comment on that. The key to not 

making the food versus fuel debate worse by cellulosic ethanol is 

to identify those feedstocks that don’t use cropland, and there are 

a lot of feedstocks out there that don’t use cropland. I mean, the 

29 

worst thing would be to take prime land out of production and 

plant grasses on it for cellulosic feedstocks. There are other feedstocks that can be used and I think corn stover, corn stocks, the 

corn cobs is the No. 1—it is going to be the first big volume feedstock that is going to not make worse the food versus fuel debate 

because it is a crop residue. The other one is wood waste that is 

being wasted now. So tapping into waste streams is the most efficient way to go for cellulosic feedstocks. 

Mr. RECKER. I agree that any of us farmers will do whatever is 

profitable, but I have to agree with Dr. Babcock that we sure don’t 

want to be convincing corn growers to be planting grassland and 

really exacerbating our problem with our livestock friends further 

by reducing the amount of corn that is planted. But there are products within the corn plant that we can use and all forms, just wood 

waste and waste in cities. But whatever is going to be profitable 

for corn farmers, they will adopt into cellulosic technology. 

Senator NELSON. Well, one final comment about subsidy and the 

high cost of the production of ethanol that some people have raised 

that question pretty continually during the whole process. Ethanol 

is a net user of power, or of energy to produce and the comments 

about that. But if you really factored into the cost of oil coming 

from the Middle East the cost of the defense of the Middle East 

and the military cost associated with that, you would see that 

maybe the cheap oil that existed in the Middle East wasn’t so 

cheap, and if the true cost had been shown at the pump, one wonders how much faster we would have come to the first generation 

of alternative fuels. 

So when we look at subsidies, what we really need to look at is 

what the true cost is of doing it, and then another cost is maybe 

harder to quantify. But the real cost associated with, and it is a 

fair cost that we want to pay to become energy independent so that 

we are not relying on others, on other parts of the world for our 

energy needs, which has affected us significantly. 

The final thing is, last week, I toured Southwest Nebraska where 

now there are oil wells pumping and being drilled. I know it is happening in North Dakota. They are pumping there. What has happened is the high cost of oil has now driven it back to domestic production, which we had domestic production but it cost too much to 

bring it out of the ground here when you could get it over there. 

Well, over there, we weren’t factoring in the true costs. 

But I think we are all today frustrated economists to one degree 

or another without the advantage of the skills or the education, but 

we are all trying to do that. But I think people are adding two and 

two and getting four and asking the question of why wouldn’t we 

keep our money here at home? 

We have to compliment T. Boone Pickens for raising the awareness of people today just about windpower, to name one source of 

alternative fuels and renewable fuels. But I think the American 

people are wiser today, better consumers, and we have the opportunity to do things here at home and I think most people will bear 

with us as we really see this paradigm shift so that we are much 

more energy efficient, but energy producing here at home. 

Chairman HARKIN. Thank you very much, Senator Nelson. 

30 

Do any of you have any last things you would like to add that 

haven’t been brought up or that we need to know about, or what 

you think we ought to be doing? It is open to anybody at all, if 

there are any last things. 

[No response.] 

Chairman HARKIN. Going, going—well, thank you all very, very 

much for being here. I thought it was a very good interchange and 

good testimony. We appreciate it very, very much. 

Now we will move to our second panel. We will take a short 

break first. Since it is a quarter to 11, we will get back in 10 minutes. 

[Recess.] 

Chairman HARKIN. We will now move to our second panel. I just 

wanted to take this time to also mention a couple of people who 

are here with us today. Leland Strom, who is Chair of the Farm 

Credit Administration is here, Leland, right here, and also Nancy 

Pellet, a member and former Chair of the Farm Credit Administration is here, also. 

Now, with our second panel, we wanted to look upon sort of 

where are we headed. The last panel is where we are, what is happening out there, what are the dynamics. I certainly got ahead of 

myself a little bit at the end about talking about cellulose ethanol, 

but this panel is focused on where are we headed. 

And so again, the same rules apply. Each of your statements will 

be made a part of the record in their entirety. I ask that you keep 

to five or 6 minutes and we will just go from my left to right. 

So our first witness is Mr. Dean Oestreich. He is the Chairman 

of Pioneer Hi-Bred and Vice President of DuPont Agriculture and 

Nutrition located in Johnston, Iowa. Mr. Oestreich has been with 

Pioneer since 1974, starting as a corn breeder, for years working 

global operations before becoming President of Pioneer and now 

also its Chairman. 

Mr. Oestreich, thank you very much. It is an honor to have you 

here, and please proceed. 

STATEMENT OF DEAN OESTREICH, CHAIRMAN, PIONEER HIBRED, AND VICE PRESIDENT, DUPONT AGRICULTURE AND 

NUTRITION, JOHNSTON, IOWA 

Mr. OESTREICH. Thank you, Chairman Harkin, Senator Nelson. 

Thank you very much for allowing me the opportunity to comment 

on this important topic today. 

Pioneer and our parent company DuPont are fully engaged in 

working to help society meet the needs for food, feed, fiber, and fuel 

from agricultural products. We are doing this through applying 

science to come up with solutions, science-based solutions for society moving forward. We also recognize that policy plays an important role in the agricultural productivity equation and I look forward to working with you as you work to craft new policies to help 

improve U.S. agriculture as well as the global condition. 

My message today is a very simple one. We have a fundamental 

belief that agricultural productivity can meet the needs for food, 

feed, fiber, and fuels from agricultural products for the global 

needs. Through the 20th century, the U.S. farmers have a great 

tradition of improving productivity by driving more yield per acre. 

31 

We are delivering improved seed products. We are getting better 

agronomic knowledge out there. We are hardening these crops 

against pests, diseases, and drought events in the marketplace 

today. 

Since I began my career at Pioneer, we have doubled U.S. corn 

yields on a per acre basis. That is a very important number to 

think about, and we need to look at how we can do that again. It 

has been my opinion that the biggest problem for production agriculture in the U.S. has been over-capacity, capacity to produce 

more on a global basis than the world needs. I believe society and 

economics today are challenging agriculture to produce whatever 

we can responsibly. 

So at Pioneer, we have committed throughout the next 10 years, 

to add corn and soybean yields on average through the use of products by 40 percent. We believe that through the materials in our 

research pipeline, which we have a very good view of for the next 

10 years, we can add corn yields in the U.S. by 40 percent and soybean yields U.S. by 40 percent. Two-thousand-and-eight is the beginning year, so almost 9 years from now, we need to be able to 

take that forward. 

So if you look at a baseline corn yield of about 160 bushels per 

acre in the United States today, 40 percent would take us to about 

225 bushels per acre. We are doing this through research and 

science, through improving the native germplasm, through molecular breeding, through bringing in specific genes into the corn and 

soybean genome to help us bring unique traits to those. We will 

also be improving our inputs so we will be able to grow more corn, 

more soybeans with less water, and another very important target 

is nitrogen utilization, as well. 

We believe that investments in research, both public and private, 

strong intellectual property protection to promote agriculture innovations, and an economic climate that allows our farmers to invest, 

as we talked about this morning earlier, will drive these results. 

Unfortunately, much of the rest of the world is working at an agricultural productivity much below the United States, in some 

cases only about 20 percent of the productivity on a per acre per 

hectare basis as we see in the U.S. That does mean, however, that 

there is great potential for global expansion in agricultural productivity. There certainly are barriers that we need to overcome to 

move forward around the globe, such as access to credit, improved 

access to agronomic knowledge and information, as well as secure 

land tenure. It will take private investment, public research and 

public policy to make strides in these areas and we believe that the 

U.S. can help in a number of ways to be able to take steps in that 

direction on a global basis. 

So talking about crop productivity was my first statement. The 

next statement is around fuel, or biofuel productivity, as well. We 

at Pioneer are very focused on the input side of biofuels in agriculture through seed and crop protection chemicals, and our parent 

company, DuPont, is working on the next generation of biobutanol 

and also cellulosic conversion methods. So let me just go through 

the productivity elements that we are talking about in the biofuel 

arena. 

32 

First, we have identified 7 percent variability in the corn hybrids 

we are working with in the amount of ethanol per bushel that they 

produce. So we are working on the top end of that range, in that 

7 percent of variability in ethanol per bushel. We have developed 

the first assay for grain buyers to measure the amount of ethanol 

directly in a bushel of grain. We have developed hybrids with increased fermentable starch and improved feeding value of those coproducts and we are continuing our research in those areas. And 

we are also developing oil seed crops with higher levels of oil and 

modified protein characteristics for improved food, feed, and fuel. 

So further down the value chain, then, we are working to develop 

cellulosic conversion, to develop the bugs, the microbes that do that 

conversion efficiently, and we are working on the genetics of those 

bugs to be able to make that work much more efficiently than we 

have been able to do in the past. 

And then finally, on the next generation front, we are working 

on biobutanol, a next generation biofuel, also an alcohol made in 

a fermentation process, but it has a different set of characteristics 

that we believe will make it a very strong companion with ethanol. 

Those characteristics include being able to—it does not absorb 

water like ethanol does, so we can use existing pipelines. We can 

make a stronger blend ratio in terms of existing vehicles that are 

out there today. We have experimented and had good results up to 

16 percent blends. It has about the same oxygen concentration as 

the 10 percent blends with ethanol. So we believe that this is very 

fundamentally a good companion product to ethanol and are working toward commercialization of biobutanol. 

So farmers have a long history of productivity and we believe 

that through the research and the science that we are delivering 

and the economic situation that allows them to invest in the production, as we talked about in the first measure, will help us accelerate. That 40 percent improvement in yields I talked about is 

more than twice our historic rate of genetic gain per year, so it is 

about twice——— 

Chairman HARKIN. Forty percent? 

Mr. OESTREICH. The 40 percent improvement in corn and soybean yields in the next 10 years is a little more than twice our historic rate of improvement, if we look at the time period as we have 

talked about earlier. And the reason that we believe that we can 

double our rate of productivity improvement is the science and also 

the economic stimulus that comes with global demand increasing 

that says that we can use agriculture to meet needs of society beyond those that we have in the past—food, feed, fiber, fuels, and 

biomaterials for new products. 

So thank you for the opportunity for allowing me to comment on 

this morning and I look forward to working with you in any way 

that we can at DuPont to help this process. 

[The prepared statement of Mr. Oestreich can be found on page 

95 in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Oestreich. Thank 

you. That is probably the most hopeful thing I have heard in a long 

time. 

Now we turn to Dr. Thomas Foust, an internationally recognized 

expert in biofuels, Research Director of the Biofuels Research ProVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
33 

gram at the National Renewable Energy Laboratory in Golden, Colorado. Dr. Foust guides and directs NREL’s biomass conversion 

technology as well as research areas addressing the sustainability 

of biofuels. Dr. Foust has over 20 years of research and management experience, including over 100 publications in bioenergy. 

Dr. Foust, welcome and please proceed. 

STATEMENT OF THOMAS FOUST, BIOFUELS TECHNOLOGY 

MANAGER, NATIONAL RENEWABLE ENERGY LABORATORY, 

GOLDEN, COLORADO 

Mr. FOUST. Thank you, Chairman Harkin and Senator Nelson. 

Thank you for this opportunity to address this important issue. 

Like you just mentioned, I am the Biofuels Research Director at 

the National Renewable Energy Laboratory, which is the Department of Energy’s primary laboratory for researching in these 

issues. 

I would just like to build upon what was discussed in the first 

panel. Although there is considerable debate on the impact that 

first generation biofuels are having on food and feed prices, the 

overwhelming consensus is that advanced biofuels, or cellulosic 

biofuels, will greatly lessen any impact on food and feed prices. By 

using non-food resources, advanced biofuels avoid any direct competition and provide us a good pathway to meet the aggressive RFS 

goals outlined in the Energy Independence and Security Act of 

what was mentioned, the 36 billion gallons. 

With that said, let me address the potential of advanced biofuels. 

First, let us start with ethanol. As is well known, currently production of ethanol in the U.S. is almost exclusively from corn and predominately from the issues addressed in the first panel. Although 

the potential of corn-based ethanol is very good, ultimately, it is 

limited for these aggressive RFS goals unless we move to advanced 

biofuels. 

Cellulosic ethanol is really the path over corn food-based ethanol 

by utilizing feedstocks which are abundant and do not directly compete with food and feed needs. Fortunately, there has been a very 

robust program in cellulosic ethanol in this country that myself and 

many of my colleagues have been involved in and the progress has 

been good. To put that in perspective, the Department of Energy 

performs a rigorous state of technology assessment every year to 

estimate current production costs based on performance of laboratory technology. The 2007 results, the most recent results, estimate 

a production cost in the $2.20 to $2.50 per gallon range. So this 

compares very favorably with current corn ethanol and gasoline at 

crude oil and corn prices. 

But I think it is important to be known that this is still a precommercial state. It is not a mature state of technology, so more 

can be done to secure the long-term competitiveness of cellulosic 

ethanol and make sure this industry prospers, and this is the goal 

of DOE and NREL to achieve this by 2012. 

Like previous panelists mentioned, the volume production of cellulosic ethanol is very large, well over 50 percent of current gasoline usage and as high as what the previous panel mentioned as 

90 percent. So therefore, cellulosic ethanol should really remain the 

cornerstone of immediate U.S. biofuels, advanced biofuels developVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
34 

ment. With the continued focus on cellulosic ethanol and continued 

good progress in R&D, our nation should soon realize the benefits 

of advanced biofuels technology. 

However, as promising as cellulosic ethanol may be for addressing our nation’s transportation needs, it does have some limitations. Commonly cited is reduced energy content. It does absorb 

water, current pipeline issues. And very importantly, ethanol is 

only suitable as a gasoline replacement. It really does not address 

diesel and jet fuels. 

So I think our current advanced biofuels needs to expand beyond 

ethanol and specific recommendations that I would have is, like my 

previous panelist discussed, butanol, a member of the alcohol family, actually higher in energy content and less a tendency to absorb 

water, making it more compatible with the fuel infrastructure. It 

is a good way to go. It is a similar fermentation process to ethanol. 

It does have challenges. It is not as far along as ethanol. But because of the long-term potential, it should be pursued. 

The other area I would like to mention is thermochemical conversion. Although the current cellulosic ethanol program does have a 

major thermochemical component of it, these technologies show 

promise well beyond ethanol. You know, to put this in kind of an 

analogy, if biochemical conversion is the elegant method of producing alcohols from certain feedstocks, thermochemical conversion 

is kind of the Swiss army knife method of attacking a wide range 

of feedstocks and producing a broader spectrum of fuels. Some of 

these can produce fuel similar to gasoline and diesel, current gasoline and diesel, so they are means to lowering the barriers to commercialization. 

Finally, let me address aquatic species, or micro-algae, getting a 

lot of press. These technologies do provide a pathway to producing 

remarkable levels of lipids, ten to 100 times to 1,000 times current 

yields per acre of, say, for soybeans, for instance, and they do so 

without impacting the food, feed, and chemical infrastructure of the 

nation. Therefore, they could really eliminate—potentially eliminate all food, feed, fuel discussions. 

And additionally, bilipids, by their inherent nature, which are 

the oils expressed by these algae, lend themselves to higher energy 

density fuels, such as diesel and jet, so they can really expand our 

spectrum to all fuels. 

Finally, I would like to conclude, but probably most importantly 

with the issue of sustainability of advanced biofuels. I think it is 

known advanced biofuels have clear environmental benefits compared to first generation and conventional petroleum fuels, such as 

better energy balance or significantly reduced greenhouse gas emissions. Although those benefits are significant, I think we really 

need to study sustainability in a comprehensive cradle-to-grave research perspective. More understanding is needed about the overall 

life cycle impacts of these fuels in the overall context of land, 

water, and air. 

One sustainability issue particularly relevant to this hearing is 

land use competition. It has really been getting a lot of press recently, both direct and indirect land use competition, and the role 

that advanced biofuels will play. The degree to which a relationship 

exists between land use change and large-scale biofuels really at 

35 

the RFS goals we are talking about, 30 to 60 billion, needs to be— 

it is beginning to be addressed, but more needs to be done. 

In general, I think it is fair to say that land use changes for second generation biofuels will be less extensive than first generation 

biofuels, but it really needs to be understood in the context of the 

continental United States as well as global impacts such as Amazon rain forest. 

So let me summarize by saying advanced biofuels are a step in 

the right direction to addressing tomorrow’s food, feed, and fuel potential. The current successful effort on cellulosic ethanol needs to 

remain on track. However, we really do need to expand that and 

look at these other fuel options, diesel and jet. And then we also 

need to understand the policy options and really understand this 

whole food versus fuel controversy as we move into advanced 

biofuels. Thank you. 

[The prepared statement of Mr. Foust can be found on page 64 

in the appendix.] 

Chairman HARKIN. Thank you, Dr. Foust. 

I want to ask you about butanol in a second, but let us move on 

here to Dr. Bruce Dale, Distinguished Professor of Chemical Engineering, former Chair of the Department of Chemical Engineering 

at Michigan State University. He has won numerous awards in this 

field. Dr. Dale is interested in the environmentally sustainable conversion of plant matter to industrial products while still meeting 

human and animal needs for food and feed. 

Dr. Dale, again, welcome to the committee, and again thank you, 

and please proceed. 

STATEMENT OF BRUCE DALE, ASSOCIATE DIRECTOR, OFFICE 

OF BIOBASED TECHNOLOGIES, AND DISTINGUISHED UNIVERSITY PROFESSOR, DEPARTMENT OF CHEMICAL ENGINEERING AND MATERIALS SCIENCE, MICHIGAN STATE UNIVERSITY, EAST LANSING, MICHIGAN 

Mr. DALE. Senator Harkin and Senator Nelson, thank you for the 

invitation to be here. I appreciate the opportunity to testify. I have 

been involved in cellulosic ethanol research for 32 years. My laboratory develops technologies to make low-cost biofuels from our 

abundant reserves of cellulosic plant materials. 

For the last 8 years, I have been involved in life cycle analysis 

and applying life cycle analysis to biofuel production. Life cycle 

analysis deals with the systemwide environmental impacts of specific products or processes. It is from this background of laboratory 

research and life cycle analysis that I am going to speak to you this 

morning. My opinions are my own and don’t reflect any positions 

on behalf of Michigan State University, I was admonished strongly 

to tell you. 

I am going to make and then briefly elaborate on three key 

points. These are as follows: We can, indeed, produce many tens of 

billions of gallons of ethanol and other biofuels from cellulosic materials. These biofuels are going to end up being a lot less expensive than petroleum fuels. They can also be much better for the environment and bring new prosperity to rural America if we do them 

right. Cellulosic biofuels will also enhance our national security by 

36 

ending the strategic role of oil and the power of those who control 

oil. 

No. 2, there was a recent high-profile scientific paper that linked 

corn ethanol to large greenhouse gas emissions due to so-called, 

quote, ‘‘indirect land use changes,’’ unquote. The paper caused 

quite a furor. The data and assumptions, however, in that paper 

are not holding up very well to closer scrutiny. I believe the paper’s 

conclusions do not currently meet standards of either scientific significance or of life cycle analysis and should not be used to shape 

public policy. 

I believe the investments underway will allow us to cost effectively convert cellulosic biomass to fuels. A similar investment both 

in size and scope must be made soon in a related crucial area. We 

need to develop a planting, harvesting, transportation, storage, and 

other infrastructure that will allow us to sustainably produce and 

deliver hundreds of millions of tons per year of biomass to the biorefineries. 

We can grow and deliver millions of tons of cellulosic biomass for 

less than $80 per ton. The energy content of cellulosic biomass at 

this price is equal to the energy content of oil when oil is about $25 

a barrel. If we can efficiently convert, therefore, the energy content 

of cellulosic biomass, we can compete well with high-priced oil, very 

well. 

There is at least $5 billion in public and private funds now being 

devoted to this task, the biofuel conversion task. I believe we will 

succeed much more quickly than most people realize. But we have 

got to stick to our objectives and not allow ourselves to be diverted. 

I have lived long enough to see several declarations of energy independence, all of which have proved futile, ultimately futile. 

Sustainability is typically described as a three-legged stool consisting of economic, social, and environmental sustainability. All 

three legs are important. But I submit also that the government of 

a free people has a fourth crucial leg to that sustainability stool. 

We may call it the national security sustainability leg. Therefore, 

the Energy Independence and Security Act of 2007 is rightly 

named. First and foremost, that Act is and ought to be about providing for the common defense and promoting the general welfare 

by ending our near total dependence on petroleum for transportation fuels. We have got to get off petroleum. We have got to do 

it. 

I am committed to making sure biofuels are produced in an environmentally beneficial manner. Cellulosic biofuels, particularly 

those made from perennial grasses and woody crops, are by their 

nature well suited to provide environmental benefits. We need to 

ensure that the cellulosic biofuels deliver on those promised benefits. 

The key is to consider the whole system and then act to improve 

the system’s performance. I support the recommendations of the 

Ecological Society of America, which are attached to my testimony, 

to enhance the sustainability of cellulosic biofuels. Those recommendations also focus on systemwide performance. We have got 

to stop thinking about pieces of the puzzle and think about the 

whole system. 

37 

However, inadequate and incomplete environmental analysis 

must not be allowed to sidetrack us. Environmental sustainability 

is one, but only one, leg of our sustainability stool. That brings me 

to my second point. A recent high-profile paper in the journal 

Science linked the production of U.S. corn ethanol to large greenhouse gas releases caused by land use change elsewhere in the 

world. There are no actual data connecting U.S. ethanol production 

with land use change anywhere in the world. All of the conclusions 

of that paper are based on economic modeling. The modeling itself 

relies on assumptions and data that are now being debated by the 

scientific community. I am very involved in that debate. 

The paper is not holding up well to additional scrutiny. For example, three different models have now been applied to this indirect land use analysis and all three are giving quite different results. Obviously, not all three can be correct at the same time, so 

it is unclear what weight to give any of the models, since they are 

all telling us different things, very different things. 

The language in the Energy Act of 2007 required that life cycle 

greenhouse gas emissions be determined for significant indirect 

land use change. Proper life cycle analysis followed standards set 

out by the International Standards Organization, or ISO. The 

paper in Science simply does not meet those standards. It is completely inadequate in terms of allocation, system boundaries, and 

sensitivity analysis among other technical life cycle issues. Therefore, until the scientific community is able to come to some consensus about the validity of the conclusions, the paper’s conclusions 

cannot be regarded as scientifically significant. 

Even if there were scientifically significant life cycle research 

linking corn ethanol to indirect land use change, it seems to me 

that making U.S. farmers responsible for land use decisions made 

by others is both unfair and a terrible precedent. Are we going to 

make every U.S. industry responsible for greenhouse gas generation by its competitors around the world? That is exactly what we 

are doing to U.S. corn growers through the indirect land use 

change issue. 

The furor over indirect land use change offers one of the best recent examples of what I mean by not allowing ourselves to be diverted from our goal of ending the strategic role of oil in the world. 

All biofuels, not just corn ethanol, have been set back by that single paper that does not meet standards either of scientific significance or of life cycle analysis. 

Third, I want to talk briefly about logistical issues. The cellulosic 

biofuels industry will consist of two parts, one, growing and transporting the biomass to the bio-refinery, and two, processing the 

crop to biofuels. While more can and should be done, I think we 

are largely addressing the biomass processing issues, but we are 

not doing anywhere near enough to address the logistical issues 

connected with cellulosic biofuels. 

If current trends continue, we may very well find ourselves with 

excellent bio-refineries but without the means to supply the bio-refineries with the raw materials they require. We need integrated 

systemwide research and development on how to grow, harvest, 

store, and transport cellulosic biomass to the bio-refinery. The research should include studies to improve the environmental susVerDate Aug 31 2005 15:04 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 C:\DOCS\45328.TXT SAG2 PsN: SAG2
38 

tainability of both corn and cellulosic biofuels. For example, integrating cover and companion crops with corn agriculture will do 

much to enhance corn’s environmental performance. Cover crops 

could provide an additional source of cellulosic biomass to the biorefinery as well as high-value animal feed protein. 

Cellulosic biomass sustainability research could and should teach 

us how to grow energy crops that sequester carbon in the soil, enhance biodiversity, reduce erosion, use nitrogen and other nutrients 

efficiently, and improve the water-holding capacity of soil. We 

should develop and reward approaches that enhance the environmental performance of the entire linked system of crop production, 

biofuel production, and animal feeding. 

We should also find ways to strengthen rural communities as we 

develop the cellulosic biofuels industry. For example, cellulosic biomass is inherently bulky and difficult to transport. Regional biomass processing centers, perhaps owned by farmer co-ops, could 

pretreat and densify biomass for both animal feed and biofuel production. Similar regional processing could convert cellulosic biomass to liquid bio-oils for subsequent upgrading to fuels. These regional processing centers could provide a way for farmers and 

farming communities to capture more of the value added to their 

crops and general rural employment. 

I believe the Senate Agriculture Committee should take a leading 

role to ensure that we develop the logistics for the cellulosic 

biofuels industry while improving the environmental and the social 

sustainability of all biofuels. This effort deserves a funding level 

comparable to the billions now being devoted to bio-refinery development. It is just as important, if not more important. 

Finally, Senator Harkin, I understand that you will soon introduce legislation requiring all new cars sold in the U.S. to be flex 

fuel. I enthusiastically support such legislation. I also encourage 

you and the other committee members to cosponsor and then pass 

S. 3303, the Open Fuel Standards Act. Taken together, flex fuel 

legislation and open fuel standards will help provide true fuel 

choice. When the American car owner has fuel choice, so will the 

car owners of the world. When we have fuel choice and inexpensive, sustainable biofuels, we will have ended the power of those 

who control oil. 

Thanks. I look forward to discussion, Senator. 

[The prepared statement of Mr. Dale can be found on page 55 in 

the appendix.] 

Chairman HARKIN. Thank you. 

Our final panelist today is Dr. Stephen DiMagno, and he is Professor of Chemistry at the University of Nebraska at Lincoln. His 

research interests include chemical catalysis, energy storage, and 

the use of bio-derived materials for fine chemical synthesis. I know 

he is going to explain to us what all that means. Thank you. 

STATEMENT OF STEPHEN DIMAGNO, PROFESSOR, 

UNIVERSITY OF NEBRASKA-LINCOLN, LINCOLN, NEBRASKA 

Mr. DIMAGNO. Mr. Chairman, Senator Nelson, thank you very 

much. I appreciate the opportunity to speak on behalf of the University of Nebraska about opportunities for energy research in general and in particular about those opportunities that have the 

39 

greatest potential impact for the Midwest and the State of Nebraska, namely biofuels and windpower as it relates to the production of liquid fuels. 

Excepting nuclear and tidal power, all energy used on the planet 

is energy of captured sunlight. Fossil fuels that we use today are 

the result of sunlight captured and stored as chemical energy by 

photosynthesis and carbon dioxide fixation reactions carried out 

over the course of millions of years. We use these fossil fuels in 

huge quantities, largely because historically, they have proven to 

be the least expensive means to generate energy in large scale, 

though the——— 

Chairman HARKIN. Pull the microphone a little closer to you. 

Just pull it closer. 

Mr. DIMAGNO [continuing]. In large scale—excuse me—though 

the increased economic, political, and environmental costs of fossil 

fuel combustion are now matters of serious concern. Though it took 

nature millions of years to capture sunlight and accumulate the 

fossil fuel resources we burn today, the amount of energy actually 

contained in the sunlight hitting the earth’s surface is immense. 

One hour of sunlight is equivalent to the amount of energy used 

on the planet in 1 year. 

The good news is that the energy to solve our problems is in our 

backyard. If efficient or even relatively inefficient methods are 

found to capture, store, and transport a small amount of the sun’s 

energy in biofuels, great progress will be made toward a sustainable energy future. 

The vast majority of petroleum is consumed as liquid transportation fuel. Thus, the challenge to replace imported petroleum lies 

in developing viable biofuels. Biofuels that are of importance to Nebraska include green ethanol, cellulosic ethanol, and biodiesel. 

Green ethanol production is already a relatively mature largescale industry for the Midwest. Nevertheless, there are many opportunities in research to improve the efficiency of green ethanol 

production. Improved efficiencies in the transport and use of raw 

materials and fermentation co-products, integration of ethanol production into cattle feeding operations, methods to increase distillation efficiency in ethanol separation, and the use of clean ethanol 

and/or clean carbon dioxide produced as precursors for value-added 

products are all areas of active research at the University of Nebraska. 

In order to meet future mandates for fuel ethanol, the conversion 

of cellulose biomass to ethanol will be required. Research on several important problems will be essential if cellulosic ethanol is to 

become a viable biofuel option. These include efficient raw materials, harvesting and transport, engineering of crops to make the 

cellulose easier to degrade and process, biomass pretreatment and 

cellulose extraction, and improved production and performance of 

organisms and glycosidase enzymes that convert cellulose to simple 

sugars for fermentation. If these issues are addressed satisfactorily, 

Nebraska will be able to use its existing ethanol infrastructure for 

the fermentation and distillation of fuel-grade ethanol from biomass. 

Research is also needed to boost the production of biodiesel, a 

biofuel derived from transesterified plant oils or animal fats. The 

40 

production of biodiesel from ethanol and vegetable oil is a relatively 

straightforward process, though there is still room for improvement 

for water tolerant transesterification catalysts. 

The largest concern in the biodiesel area is the availability of sufficient quantities of inexpensive vegetable oil. Soybean production 

is on the order of 50 gallons per acre of oil, while approximately 

20 gallons of oil are obtained per acre of corn. Further efficiencies 

in plant oil production are necessary if biodiesel is to be competitive and a high-volume source of transportation fuel. 

Algae are a potentially large-scale source of inexpensive plant 

oils, as we heard earlier. Algae are perhaps the most effective photosynthetic organisms for generating biomass from sunlight. Along 

with affiliates at several premier institutions across the United 

States, the Algal Biofuels Consortium based at the University of 

Nebraska is developing the biology, genetic and metabolic engineering and processing of algae for advanced biofuels. Despite the great 

promise of algae, naturally occurring species do not appear to have 

all the characteristics necessary for algae to be fully economical 

and a viable biofuel source. For algae to achieve full potential, the 

ability to genetically and metabolically modify the organisms will 

be critical. 

The direct conversion of wind power into electricity is a relatively 

inexpensive, reasonably efficient means to capture renewable energy, as is evident by the large increase in wind turbine construction throughout the Midwest. Where a transmission infrastructure 

is in place, as it is in the Ainsworth Corridor, for example, a direct 

feed of electrical energy into the power grid is the most efficient 

means to capture wind energy. However, if power is generated in 

a widely distributed fashion on farms and rural communities, storage of captured wind power is desirable. Direct conversion of electricity to hydrogen or liquid fuels for energy storage is essential in 

these settings. 

In conclusion, there are many areas of energy sciences which are 

ripe for research and in which the University of Nebraska has an 

ongoing research program. I have outlined a few of these programs 

here today and there are others I did not have time to mention. 

There is still much work to be done, but the good news is that 

though the scale of the energy problem facing us is large, there is 

a truly vast amount of energy available for our use if we can find 

the means to use it efficiently. 

Thank you very much for the invitation to appear and I would 

be happy to answer any questions. 

[The prepared statement of Mr. DiMagno can be found on page 

61 in the appendix.] 

Chairman HARKIN. Thank you very much, Dr. DiMagno. Thank 

you all. 

Again, this is looking ahead. Mr. Oestreich, I will just start with 

you. The 40 percent increase that you mentioned in the next 10 

years in corn yields, soybean yields, how much confidence can we 

have in that? 

Mr. OESTREICH. Again, I will go back to that. Sometimes in the 

corporate world, we have these lofty goals to reach out to some aspirational place. This 40 percent improvement goal in the next 10 

years is not an aspirational goal but it is rather one that is added 

41 

up by looking at our pipeline that is in the research today. So it 

is trait by trait, material by material. The progress that we have 

been making today in our research is faster than we have ever seen 

it before. The science is incredible. The tools of biotechnology are 

helping us accelerate our research and do a lot more precise work 

on these plants. It has helped us develop a deeper knowledge of 

how plants work and how to improve them. 

You know, a lot of society understands biotechnologies as GMOs. 

That is one element, and it is an important element going forward 

and we will see more traits and more transgenes in the future at 

an accelerated rate than ever before. But the additional element of 

biotechnology that is helping us equally is the fact that the knowledge of the plants, the understanding, the tools of biotechnology 

are helping us in some cases to drive parts of our research 1,000 

times faster than we have been able to do it before. 

So I started my career as a corn breeder and I have done this 

sort of work for about 12 years in my career. The tools that our 

corn breeders and our soybean breeders and our biotechnologists 

are working with today are just incredible and those are the things 

that are driving that accelerated productivity growth rate that I 

am talking about. So it is a plan and not just an aspiration. 

Chairman HARKIN. Well, that raises the confidence level quite a 

bit. 

Second, you are talking about productivity of corn and soybeans. 

I am also told that a lot of research is being done, and I assume 

by you, by DuPont, others, in as the corn yield goes up from the 

ear of corn itself, that research is being done into how you increase 

also the cellulosic content of the stalk itself. Could you address 

yourself to that? 

Mr. OESTREICH. We are doing work to characterize our stalks 

and the materials that are left after the grain harvest. I will tell 

you that our long-term experience in working with silage for animal feeding is helpful around thinking about the cellulosic work. 

The other thing that I think is changing over time and decades 

is that plant populations are increasing. We see plant populations 

increasing, so more plants per acre, meaning more biological material on the ground. We see that increasing at about 1 percent annual gains for the last 35 years. So when I started my career, an 

average corn population in Iowa or Nebraska would have been 

about 22,000 plants per acre. 

Chairman HARKIN. How much? 

Mr. OESTREICH. About 22,000 plants per acre. 

Chairman HARKIN. Yes. 

Mr. OESTREICH. Today, it would be more like 32,000 plants per 

acre. So we have more density of those materials out there and we 

are looking at how we might improve the efficiency of that byproduct use of the stubble and the cornstalks and the corn cobs, as we 

talked about today. 

But I will also tell you that for plant breeders, No. 1 has to be 

yield of grain. No. 1 also has to be strong agronomics, disease resistance, growth under different environments, things like drought 

tolerance, nitrogen utilization. And another characteristic that we 

are working on is the amount of cellulosic ethanol or biobutanol in 

a corn stalk or a corn cob. 

42 

Chairman HARKIN. Well, I guess closely related to that is if we 

are going to increase this productivity, how much of it depends on 

greater utilization of resources—water, fertilizer, chemicals? Can 

we achieve this increased productivity without compromising our 

soil and water and other resources? 

Mr. OESTREICH. I will give you an example. On our nitrogen utilization project, our goal of that project, which we believe will start 

to commercialize by mid-next decade, will be to allow a farmer to 

grow the same yields as today under 20 percent less nitrogen, or 

20 percent higher yields under the current utilization of nitrogen. 

So improved nitrogen efficiency for a bushel of grain produced. 

Drought tolerance, of course, the same targets, right? We need to 

be able to protect those plants better under those drought events 

and therefore use less water, or in some cases if you are working 

in an irrigated environment—I was talking to some farmers in 

Southwestern Kansas last week. It is very much on their minds. 

They have limited irrigation capability. They want hybrids that can 

yield equal to today or more than today with less water, and we 

believe we will be able to do that. 

Chairman HARKIN. Dr. Foust, do you expect thermo-chemical 

biofuels to achieve the same cost goals as DOE projects for cellulosic ethanol? 

Mr. FOUST. That is a good question. We set the target—to answer your question, yes, because we set the target, the 2012 target, 

based on a market target which is $1.33 a gallon, which is 

benchmarked at the sixty-five a barrel crude, gasoline from sixtyfive dollars, so that is our R&D target. 

But to answer your question kind of more elaborately, right now, 

based on our state of technologies, thermochemical is actually the 

lower-cost option. I think that is why you see——— 

Chairman HARKIN. Thermochemical is lower now? 

Mr. FOUST. Yes, thermochemical compared to biochemical fermentation of ethanol, more of your traditional enzymatic hydrolysis 

fermentation. And I think the reason that is, is because of a more 

mature state of technology. Gasification has been around. It is just 

essentially a form of combustion. It has been around for 50 years 

And then syngas synthesis to fuels, again is a technology that has 

been around since World War II. The challenge is taking biomass 

gasification and then sinking that up with fuel synthesis. 

But if you actually look at the commercial plants that are being 

deployed—I reflect that in my written testimony—over half of those 

are actually thermochemical. So right now, if you were to go out 

and build a plant today, with today’s technology, it is actually the 

lower-cost option. But we do believe that the potential for biochem 

in the long term, since it is more efficient, to be better. 

Chairman HARKIN. Senator Nelson? 

Senator NELSON. This goes to anyone who would like to respond 

to it. Do you have any idea how long, and the ballpark would work, 

that it will take for the research and development necessary to provide a commercially viable product for the second generation for 

cellulosic material, whether it is corn chips, the other corn products, or some other cellulosic material? Do we have any idea about 

what we are looking at? I think some of it may be faster than other 

43 

parts of it, but I would kind of like to get an idea of what we are 

facing. 

Mr. DALE. Yes, I would like to address that, if I may. I believe 

we will have our first billion gallons a year of ethanol capacity from 

cellulosic materials within about 5 years, and I think at about that 

time, the technology will be sufficiently understood, sufficiently mature, the risk taken out of it far enough that it will become very 

attractive for Wall Street investment, and at that point, you will 

see the lid blow off, and it will be a matter of how fast can we build 

the plants and how fast can we supply them with the raw material, 

which is why I am really concerned that our logistics, our infrastructure be ready at that time. But that is how I see it——— 

Senator NELSON. So the infrastructure side of it might slow us 

down, not the research and development or the scientific processes 

for conversion, is that fair? 

Mr. DALE. The characteristic of large-scale processing industries 

is that 30 percent of the overall cost to make something is the processing cost. Seventy percent is the raw material cost. That is where 

we are with oil right now. Right now, that ratio is pretty much reversed for cellulosic biofuel, so our effort is to drive down the processing cost. As I said, we are investing at least $5 billion to do 

that. I think we are going to succeed more quickly than people realize. 

And so within a fairly short period of time, five, no more than 

10 years, I think we will have the cost of processing largely reduced. We will have good processes that are ready for investment, 

large-scale investment. And then we will have to make sure that 

we can get hundreds of millions of tons of plant material to these 

facilities. 

Senator NELSON. Well, might it be safe to say that the conversion 

capability for switchgrass can be developed faster than we can get 

the production of switchgrass out into the fields, suitable fields 

across the Midwest, for example? Is that part of the problem? 

Mr. DALE. I think that is true. Who is going to pay the farmer 

to grow it? He is not going to plant it until you have got a market. 

Who is going to process it? How is it going to be assembled? All 

those logistical issues are really important. 

Also, I would just like to—sorry if I am beating something over 

and over again, but I don’t think—unless our rural communities 

are able to add some value to the cellulosic material before it 

leaves their area, I don’t think they will do very well economically. 

They will just be suppliers of low-cost commodity, grass or hay or 

whatever. We need to find ways to add value locally, perhaps by 

some sort of a distributed processing, so that the plant material, 

some of the value added can be captured locally. Otherwise, I don’t 

think our rural communities will prosper like they could have unless we are ready to do that. 

Senator NELSON. Well, we are faced with the chicken or the egg 

and we need the chicken and the egg at the same time, pretty hard 

to do in this business, though, isn’t it? 

Mr. DALE. You have got to do both. You have to have the chicken 

and the egg——— 

44 

Senator NELSON. Yes, that is what we have to do. Is there any 

estimate as to what might be the finite limit of cellulosic material 

for the production of ethanol or butanol? 

Mr. DALE. Do you want to try, Tom? I have been talking a while. 

Senator NELSON. In other words, I mean, there are all kinds of 

different types of cellulosic material being talked about, but is 

there some limit to what we can produce in the way of the final 

product as an additive or as a regular fuel? 

Mr. OESTREICH. I think we heard earlier in the first panel that 

there is a blenders limit that we talked about with the current infrastructure today of the vehicles on the road. 

The plant materials that are available on a global basis are very 

large. We talked earlier about, from POET, I think, five billion gallons from corn cobs alone. I believe we can use about half of the 

corn stalks, as well as the cobs. The forestry products that are out 

there, the waste that comes from paper milling and others and 

some of the landfill materials, there are huge amounts of biomaterials that are available with efficient systems that we need to continue to increase investment in cellulosic research, both public and 

private, to move forward to accelerate. 

We will, I agree, fully reach the targets that were laid out just 

a minute ago, but there will be productivity gains needed in logistics, in processing, in the microbes that go into the system. You 

think about ethanol, improvements that have been made in the last 

two or 3 years through corn yields, through improvement in processing, through less water utilization. This is an industry that is 

30 years old. So productivity is an invested tool that we need over 

time and that will occur with cellulose, as well. 

Senator NELSON. Any other thoughts? 

Mr. FOUST. I would just echo what was said to that regard. You 

know, the one limitation that we do see is a logistics limitation. I 

think by the feedstock surveys that have been done, there is a potential, as referred to in the earlier panel, of producing well over 

a billion tons. It was actually 1.3 billion tons. And then if you just 

do a thumb-roll conversion, that comes up to 80, 90 billion gallons 

of ethanol by mid-next century. So there is almost an unlimited potential there. However, it is vehicle use, it is distribution. We heard 

about the blend wall. Clearly, a 10–percent market stops at 14 billion. I think, like Dr. Dale said, flex fuel vehicles will help. It is 

moving into the alternative biofuels so we can look at other transportation options will greatly help the situation. 

But I think right now, if we keep on going the way we are, we 

are going to be in a stairstep fashion. We produce the biofuels until 

there is a glut. Prices fall off. Growth slows. Legislation, policy, 

incentivizing in other places in the market, and so we have this 

kind of continuous growth. The more futuristic that we look at the 

whole path forward and try to eliminate the downtimes in the market would be better for the long-term accelerated growth of 

biofuels. 

Mr. DALE. I guess I would like to add a little bit more, if I may. 

I believe that there is no effective upper limit to the amount of cellulosic biofuels we can make. We have the land. We have the crop 

production technology. We can do this. It is at least 100 billion gallons a year and upwards of there. 

45 

It is more a matter—for one problem—this has been mentioned 

earlier—the agricultural problem has not been lack of ability to 

produce. It has been over-production. We finally now have a demand because of rising oil prices. We finally have a demand for the 

output of agriculture that is equal to our appetite for something. 

We have finite, limited stomachs. But how much we would like to 

travel, and I think it is an opportunity for a new era of prosperity 

for agriculture because we will be able to produce, particularly cellulosic materials, that are sustainable, that we can grow here in 

our own country and convert here, end the rule of oil in the world, 

and provide essentially all the transportation fuels we need. 

Senator NELSON. You know, the interesting thing is there is a report that one of the oil producing countries in the world is fast experimenting on a fast track basis for alternative fuels in anticipation that someday their finite quantities of oil will be unavailable 

or that it will be more profitable for them to have their alternative 

fuels for their own use and sell the oil to the world market. So I 

think it is interesting that all of us are now focused on how we 

move away from a strictly oil-based economy. 

Another matter of interest is an ethanol plant up in Dakota City 

is located close to a landfill and they pipe methanol from—natural 

methanol coming out of a landfill, which provides, I think, they 

said, about 15 to 20 percent of their energy for the production of 

ethanol. 

So when we talk about the utilization of cellulosic material to 

produce, whether it is butanol or methanol or in this case for overall for ethanol, we are going to be limited by cost-effective methods 

of extracting it, and to the extent that we get economies of scale, 

better methods, more cost effectively accessing, we are really—our 

limit is finding a cost-effective way to do almost anything that we 

want to do in the world to begin with, but particularly in this area. 

And there is some point where we will drive down the cost where 

the question is, will we still be able to have profitability. I would 

hope so. Is there a danger of losing profitability in this business? 

Mr. FOUST. Oh, I mean, very much so, just for the reasons we 

echoed. You know, in any commodity industry, obviously profitability is based on the margins, and clearly we saw that last year 

with corn prices high and a bit of an over-saturation of the market. 

The projections we have done at our laboratory do show that 

there will be, and I think you have seen it in the corn ethanol, phenomenal growth over the last couple years tapered off with growth 

now over the next couple years projections based on decreased profitability. Most likely we will see that in the cellulosic ethanol industry, too. I think that was—I don’t know if it is completely possible to prevent that per se, but I think forward reaching policies 

and incentives, kind of like Dr. Dale was talking about, vehicles 

and making sure that there is a market and there is a growth and 

public perception issues about ethanol and all those issues, sustainability, all those really need to be addressed. None of them guarantee that you won’t have the natural cycles of the market, but 

they can dampen them out. 

Mr. DALE. I would also just say, as I said in my testimony, if the 

farmers of this country and the people in the forest business, if 

they are just supplying a commodity material, cellulosic biomass, 

46 

without adding any value to it, then they are going to be subject 

to this type of cycle. So we need to think ahead about the technologies and the policies and the business structures that would 

allow us, allow farming communities to add value to the biomass 

before it leaves their area so that more of that wealth stays there 

locally and they are more insulated from commodity cycles. 

I believe as a chemical engineer, the whole history of developing 

things by chemical processing is once you have material together 

in one spot, you process it. You learn how to do more with it. And 

if we can add some value locally, we can start thinking about these 

regional biomass processing centers, as I call them, as a vehicle for 

local economic growth because you will continue to get more and 

more value, not just out of a bushel of corn, but now out of a barrel 

of biomass, you know, a ton of hay or grass. It is just the natural 

way things occur. But we need to set it up now. We need to think 

ahead and do this now. 

It is said that at the beginning of the Oregon Trail back in St. 

Louis years ago, there was a little sign that said, ‘‘Choose your ruts 

carefully. You will be in them for the next 1,000 miles.’’ OK. We 

are at the point now of choosing the kind of ruts we want to, quoteunquote, ruts we want our society to be in for the next 100 years. 

I think if we are wise and think ahead about the kind of industry 

we want to base on cellulosic biomass or renewable plant material, 

we can really construct a future that looks quite a bit different and 

quite a bit better than what we have now. But we need to think 

about it and think it through. We can have it add value to local 

communities. We can have it be much more environmentally 

friendly. But we have got to think about that now and make sure 

it happens now, because otherwise we will set in place an industry 

that will be what it is. It won’t necessarily have the properties that 

we want it to have. 

Chairman HARKIN. Well, I see our time has about run out. I 

again want to thank all of you. I think what I have heard from this 

panel is that the future is very good. It looks very good for the production of liquid fuels for transportation that we can make from renewable resources grown in this country. That the increases in productivity that we are looking at, and the use of cellulosic materials 

that can grow in areas that we aren’t cropping right now, including 

wood wastes and grasses, provide perhaps not unlimited potential, 

but the potential to replace most of our liquid fuels like gasoline 

with some form of ethanol or one of the other ‘‘nols’’, with butanol 

or something like that, or biodiesel. 

Now, we haven’t even talked about algae and the promise of 

algae-based lipids for diesel. I have heard numbers, for example, 

that when you are looking at corn ethanol, you are looking at 

around maybe 400 to 500 gallons per acre per year, somewhere in 

that range. If you are looking at switchgrass from acanthus, you 

are looking at anywhere from 700 to 1,500 gallons, depending upon 

yields and all that kind of thing. But I have heard figures, and not 

only heard figures, I have been told by some companies that are 

investing private resources into algae-based diesel production that 

they can get up to 15,000 gallons of diesel fuel per acre per year 

from algae, and all that algae takes is CO2 and sunlight. 

47 

So I don’t know where we are on that, but I know there is a lot 

of research going on. So if you add that, and you add that to the 

cellulose, the grain-based alcohols that we can make in terms of 

liquid fuels, it looks like we have indeed a future in this country 

where, as Senator Nelson said, we can actually become fairly selfsufficient. I don’t know if we can in our lifetimes, probably not in 

mine, that we can do away with all of the need for oil, but we can 

make oil more of a residual kind of commodity that we might need 

for certain applications, but that we can rely upon our renewable 

resources and fuels, to meet our fundamental needs in this country. 

We haven’t even talked about the other renewable energy resources, like wind and solar and all those other technologies that 

might focus more on the production of energy in the form of electricity rather than liquid fuels. 

So I think that we are going through a time of change, let us face 

it, in agriculture, of big changes, and there are going to be some 

discontinuities. There are going to be some upsets. I keep hearkening back to when we went from horses to mechanization. I am 

sure that for all the harness makers and the saddle makers and 

the horseshoe makers and everybody else, this was very disruptive. 

Or when we went from candles to electric lights. We didn’t go to 

electric lights because we ran out of wax. We had new technologies, 

and we have new technologies at our fingertips now, the corn genome, for example, and all the things that we can do that we have 

never had the technological base to do in the past. 

So I just think that we are going to have to get through this period as best we can, be sensitive to the kind of needs that are out 

there. We are all sensitive to food prices and fuel prices and what 

this means to family budgets. We are especially sensitive to this in 

our areas, Ben, because people here have to drive long distances. 

We don’t have mass transit in our areas. Folks have got to go to 

school. School buses go long distances. People have to drive long 

distances just to get to their jobs. We are particularly sensitive to 

the impact on our consumers in this area. 

So I hope with the proper Federal policies at our level, plus the 

proper input from the private sector, that the two can marry up 

and get us through this period of time without too many upsets. 

And I think once we start getting through this period and we see 

our way clear and we start producing more of these renewable 

fuels, then I think a lot of this uncertainty will settle down and we 

will then be on a nice pathway in our country to becoming more 

energy independent and still have the necessary food at a reasonable price for all of our consumers. 

Senator NELSON. I remain confident that we can do it, if for no 

other reason, Senator Schmidt preceded me in working on was 

called gasohol at the time, and in 1991 when I became Governor, 

we had one ethanol plant producing ten million gallons. Governor 

Branstad and I joined forces with others and we continued to push 

for the development of ethanol, hanging onto favorable tax treatment against the odds, and we did it at the time when the price 

at the pump for gasoline was modest by comparison to today. 

And if we could make the progress that we have made in the 

midst of that environment, economic environment, we ought to be 

able to accelerate the effort in this economic environment today 

48 

where the need is totally recognized. Back in the early 1990’s, it 

was sort of a way to help agriculture and better for the air and we 

talked about less reliance on foreign sources of oil. The progress 

has been fairly significant, but modest by comparison to the 

progress we need to ultimately make. But I remain confident that 

we can do it as long as we remain sensitive to the unintended consequences as well as the intended consequences and push in all the 

directions that we have got available to us. 

So thank you, Mr. Chairman. It was great to have you here. 

Chairman HARKIN. Well, thank you, Senator Nelson, for having 

us at the University of Nebraska at Omaha. Thank you to all of 

our panelists. Thank you to all of our people who have come here. 

The committee will stand adjourned subject to a call of the Chair. 

Thank you all. 

[Whereupon, at 12 p.m., the committee was adjourned.] 

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A P P E N D I X 

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