National Corn Growers Association Explains Discrepancy from Earlier Statements- There has been more fallout regarding Cargill Inc.'s plans to possibly import ethanol from the Caribbean. Senate Minority Leader Tom Daschle (D-S.D.) sent a letter last week to the company, discussing his strong objection to its plans. But in an usual move, he also threatened to alter the renewable fuels standard (RFS) package in the pending energy bill to allow for only U.S. ethanol to meet that requirement.
"Cargill's plan to import ethanol from Brazil is the wrong initiative at the wrong time," Daschle said.
Daschle was responding to a recent Reuters report in which the company said it may install a dehydration plant in El Salvador that will turn hydrous ethanol from Brazil into fuel ethanol (see RFN, 5/17/04). The benefit for Cargill is that they get to take advantage of the Caribbean Basin Initiative (CBI), allowing it to escape the 54 c/gal import tariff.
"I find it difficult to accept that one of our nation's most successful agri-businesses would consciously choose short- term profit over the long-term growth of the domestic ethanol industry, and I am eager to speak directly to Cargill executives about this trade-off," Daschle said.
In his May 18 letter to Cargill, Daschle discussed the RFS package, which among other provisions, would increase the amount of renewables (mainly ethanol) in the U.S. gasoline pool to 5 billion gallons by 2012. The RFS package, although included in stalled legislation in the Senate, has been a boom to ethanol production over the past several years. "I am concerned that the announcement of Cargill's intent to import Brazilian ethanol could jeopardize the realization of this potential. And I find it disappointing that Cargill would contemplate exploiting a loophole in American law to compete directly with U.S. farmers instead of working with them," Daschle said.
But then, the senator offered an unusual proposal. "Surely, you would agree that if Cargill chooses to move forward with its plan to transship ethanol through the Caribbean, it should not receive the benefit of the demand created by the RFS," Daschle began. "To that end, I believe serious consideration should be given to requiring that only domestically produced ethanol qualify to meet the schedule laid out in the RFS."
A Cargill spokesman acknowledged the company had received Daschle's letter, but said it was unclear whether the company would respond.
Daschle's proposal "is an intriguing idea," acknowledged Bob Dinneen, president of the Renewable Fuels Association, a main supporter of those that agreed to the principles of the RFS package. "Clearly the RFS is intended to promote domestic ethanol production....Whether a mechanism can be developed to accomplish this without running afoul of various trade agreements needs to be looked at further," he added.
The National Corn Growers Association (NCGA), which also is a main member to the RFS package, "would prefer to see ethanol production used in this country, produced in this country," responded Vice President of Public Policy Jon Doggett.
An ethanol source said if Daschle were to alter the RFS, that could further complicate the issue, as the provision would become a trade issue as well. But the source also said the senator's threat could be seen more as a political move. Even if Cargill went ahead with its plans to import ethanol, "I doubt that ethanol [from the CBI] would make its way to South Dakota," the source said. But if Daschle stays silent on the issue, that could be seen by some as advocating non- U.S. produced ethanol for the RFS, the source added.
The Governors' Ethanol Coalition, which has more than 30 members, including several U.S. states where Cargill has ethanol plants, as well as Brazil, had no comment.
Daschle's comments follow criticism from NCGA and the American Coalition for Ethanol, questioning Cargill's intentions. NCGA said if Cargill goes ahead with its plans, the company's actions would be "an affront to corn growers and farmers across the country."
Additionally, some sources found NCGA's recent stance against Cargill's plans a bit strange, since an early April press release from the association seemed to say the exact opposite. An April 6 statement from NCGA CEO Rick Tolman discussed how a recent spike of ethanol imports from Brazil was further proof that demand in the United States is outpacing domestic supply, but that could be remedied with passage of the RFS (see RFN, 4/12/04).
Ethanol imports from Brazil and the Caribbean Basin provide a good "pressure relief valve" to the temporary problem, Tolman said in that April statement. "The imports at this time are good because they allow us to satisfy the rapidly growing demand and market," he said. "A much worse situation would be for us not to be able to serve new demand," he added.
Explaining the discrepancy, Doggett said the early April statement was about a temporary solution of importing ethanol, whether through the CBI or through other countries, which would have to pay the import tariff. Cargill's proposed plans would not be temporary and while technically being a legal CBI initiative, it would "violate the spirit of the law," he explained.:
