Farmers and lawmakers are criticizing a plan by Cargill Inc. to import ethanol made with cheap Brazilian sugar cane, saying it will undermine the ethanol industry in Minnesota and the rest of the Midwest.
Cargill, the third largest ethanol producer in the United States, has said it plans to become more involved in the global ethanol trade, and is looking at building a plant in El Salvador to process the Brazilian sugar cane. The Central American nation is exempt from a 54-cents-a-gallon tariff that would apply to ethanol imported directly from Brazil.
That would mean essentially that Cargill would not lose the 52-cents-a-gallon tax exemption for U.S. refineries that blend ethanol in their fuel. If Cargill imported the ethanol from Brazil it would have to pay the tariff.
By some estimates, production costs for ethanol in Brazil are half of what they are in the United States.
Midwestern farmers are concerned about the role of U.S. agribusiness giants in fostering Brazil's ascendancy as an international agricultural power.
"It really ties my stomach in a knot," said Sever Peterson, a corn and soybean grower in Eden Prairie. "We grow it right here, and the rug is being pulled from right under us."
Executives of Minnetonka-based Cargill, under fire in Congress, said many details of the plan still must be worked out, including whether the El Salvador plant will be built.
"It's in the discussion phase, it's not a done deal," said spokesman David Feider.
In Congress, the plan has been criticized by Minnesota's two senators and others who worry that U.S. taxpayer subsidies could end up supporting competing sugar-based ethanol imports.
Sen. Mark Dayton, D-Minn., said the proposed El Salvador plant "is another result of bad U.S. trade policies and agreements, which have encouraged foreign production and cost Americans their jobs, their farms and their businesses."
Sen. Norm Coleman, R-Minn., expressed his concerns in a recent telephone call to Cargill executives. "His key point is that ethanol is about a homegrown, renewable fuel," said Coleman spokesman Andy Brehm. He added that Cargill's announcement "could have negative repercussions, causing an erosion in farm country for trade, particularly with Latin America."
Ronald Obermoller, president of the Minnesota Corn Growers Association, said the announcement has sent shock waves through farm country.
"For me, as a Minnesota farmer, I'm really disappointed that it's a Minnesota company that's doing this," Obermoller said. "We've spent 15 or 20 years developing a market, and now, through a loophole, they're going to walk in and take it."
Minnesota has 14 ethanol plants, producing about 400 million gallons a year.
Bryan Edwardson, Cargill's director for public policy in Washington, said the El Salvador project, even if it goes forward, will do nothing to undermine American farmers.
Worldwide demand for ethanol outstrips supply, even as the U.S. ethanol industry is expected to produce a record 3.3 billion gallons of the fuel additive this year. In addition, bills pending in Congress are expected to double ethanol use over the next decade.Associated Press:
