Brazil To Allow More Tariff-Free U.S. Ethanol—Sad Blip in Trade with Major Biofuel Producers
Sept. 3, 2019 (EIRNS)—President Donald Trump last night tweeted the announcement that Brazil will allow a larger volume of tariff-free imports of U.S. ethanol. The deal is to last a year. Adding this to a prior administration announcement that the U.S. will now permit E15—a blend of 15% ethanol into gasoline—all year round, instead of being banned in the summer when it contributes to smog, Trump hailed these ethanol measures as helping farmers. He tweeted last night, “Making great progress for our Farmers. Approved E-15, year round. Big additional list to be submitted & approved within two weeks. Will be even better for Ethanol, and we save our small refineries!” (The administration is granting a waiver to small refineries, to not have to blend in 15% of ethanol, which is infuriating farmers.)
It’s nice the President wants to help farmers, but the deals stink. Even Agriculture Secretary Sonny Perdue, who went to a high-profile Illinois farm meeting Aug. 28 to plug the administration’s pro-ethanol work, couldn’t make it click.
First, the “markets” logic that these measures of more ethanol use—exports to Brazil and summer blending—will increase demand for corn, which will support corn prices to the farmer, is hogwash. Given the volume of commodity speculation and other factors, despite the fact that 40% of the U.S. corn crop goes for biofuels, thanks to the administrations of George H.W. Bush, Obama and now Trump—corn prices to farmers are still way below parity price.
Secondly, guess who benefits by having the two biggest producers of ethanol—Brazilian sugar cane and the U.S. corn, which account for 90% of the world output of ethanol—import and export more to each other? It’s insane. Only the commodities traders and gas companies “win.” Thefarmers and eaters lose.
Most of all, the huge amount of farm capacity going to waste producing biofuels in both countries should have been stopped long ago. It should be phased out as soon as possible, and talks started for complementary production and trade arrangements in a new world of international cooperation for food, industry, and power, inspired by collaboration in space. We can do this.