With a sudden boom in ethanol to help slake the nation’s thirst for transportation fuel, farmers are finding that corn has more in common with gold than just its color.
Corn prices in the region have doubled since late last year, hitting more than $4 a bushel. As a result, farmers everywhere are weighing how much to plant. How they answer that question could have huge ramifications for the Chesapeake Bay.
“It’s the most exciting time since we started farming in the early 1970s,” said Robert Hutchinson, who farms 4,000 acres on Maryland’s Eastern Shore along with his brothers. “Most farmers are planting additional corn this year. We’re just responding to the market.”
While corn prices have spiked before, the increase has been temporary. This time, the U.S. Department of Agriculture is projecting prices to be more than $3.50 a bushel for years as demand for ethanol grows here, and abroad.
“Everyone you talk to says this is unlike anything we have ever seen before,” said Tom Simpson, a soil scientist with the University of Maryland’s College of Agricultural and Natural Resources. “It’s not an agricultural revolution. It is a gold rush fever.”
The ethanol boom creates a complex set of winners and losers. While increased corn prices is great news for grain farmers, higher feed prices are hammering many dairy, poultry and hog operations.
Another loser could be the Chesapeake.
The Environment and Natural Resources Transition Work Group for Maryland Gov. Martin O’Malley, warned in its report that “recent initiatives to produce ethanol from feed grains such as corn may adversely affect Chesapeake Bay restoration” as it could “drive an increase in acreage planted in corn, which typically requires heavy fertilization with nitrogen, a key Bay pollutant.”
If 1 million additional acres of agricultural land in the Bay watershed were converted into corn production, it could increase nitrogen runoff by roughly 15 million pounds a year, especially if farmers choose to convert idle land, hay fields, and pastures—all low-runoff uses—to corn, according to rough estimates by Simpson.
That would negate a quarter of the annual nitrogen reductions in the Bay watershed since 1985. Reducing the amount of nitrogen and phosphorus, which fuel algae blooms in the Bay, is the focal point of Chesapeake cleanup efforts.
High prices may also discourage participation in some conservation programs. For instance, programs that pay farmers to turn crop land into streamside buffers are less attractive when that land could produce $4-a-bushel corn. “I think there is going to be a lot of fence-row to fence-row activity in the next few years,” said Jim Pease, an agricultural economist at Virginia Tech.
For the most part, decisions driving ethanol production are being made by political and economic factors at the national scale. Water quality concerns have barely been raised as a side effect of using corn to supplement the nation’s fuel supply. “This is not a matter of what we in the watershed are going to do to water quality,” Pease said. “It is a matter of what is going to be done to us.”
Ethanol has been considered a potential vehicle fuel since the 1880s, when Henry Ford first designed a vehicle to burn it. Ford, who remained a lifelong ethanol advocate, dubbed it the “fuel of the future.” Although gasoline quickly proved to be cheaper, ethanol remained a common fuel additive through World War II.
In recent decades, ethanol use has been limited by cheap gas. Demand has been driven in large part by regulations that called for ethanol or other additives to be mixed with gasoline to reduce carbon monoxide emissions.
But the political and economic climate has changed sharply. The emergence of $2.50-a-gallon gas—coupled with a 51-cent per gallon federal tax credit for ethanol production—has made ethanol more cost competitive. Mix that with the politically potent benefit of reducing the demand for foreign oil, and it appears that for ethanol, the future is finally here.
President Bush, in his State of the Union Address, called for a national mandate of using 35 billion gallons of alternative fuels a year, including ethanol, by 2017. That would exceed the current federal renewable fuels standard, which calls for 7.5 billion gallons by 2012. Both the president and Congress are prepared to back those goals with billions of dollars in incentives, tax credits and research funds.
States are joining the ethanol push. In Pennsylvania, for instance, Gov. Ed Rendell recently proposed a state Energy Independence Strategy that would mandate the use of ethanol and other biofuels in all transportation fuels sold in the state, with a Pennsylvania production goal of 1 billion gallons by 2017, which would equal expected state imports from the Persian Gulf.
According to the Renewable Fuels Association, the United States has 113 ethanol plants with a total production capacity of 5.6 billion gallons, and another 78 plants are under construction. Seven existing plants are expanding. Some new plants will be on line this year, others will be completed in 2008-09. At that point, U.S. ethanol capacity will be 11.8 billion gallons.
To meet growing demand, U.S. farmers last year planted about 80 million acres of corn, about 20 percent of which was used for ethanol. Projections for this year’s corn production have been consistently rising: The latest U.S. Department of Agriculture projection is that 90 million acres may be planted—the most since 1944, when ethanol was being used to stretch World War II fuel supplies. Independent estimates put the number even higher.
Even with increased production, the USDA projects that by 2010, 30 percent of U.S. corn production—4 billion bushels—will go to make ethanol.
It’s not just an issue for the Bay. Curbing nitrogen pollution—which stimulates excessive algae growth in saltwater—is a goal for most coastal areas around the nation and many parts of the world. Officials are considering a 30 percent nitrogen reduction goal for the Mississippi basin, which drains half of the country, including the Midwest Corn Belt, to relieve a summertime oxygen-starved “dead zone” in the upper Gulf of Mexico.
“They have just begun to talk about how to do that, and this is putting more pressure to put more acreage under corn or continuous corn production with attendant increased requirements for fertilization and nitrogen loss downriver,” said Donald Boesch, president of the University of Maryland Center for Environmental, who has worked on coastal pollution issues around the world. “Our national policies are risking collateral environmental damage.”
Rather than going down, nitrogen levels could go up during the corn boom. The World Resources Institute, an environmental think tank, reported last fall that if corn production increases as projected, nitrogen runoff from agricultural areas nationwide could rise by more than 5 percent.
The report said additional corn acreage would likely come from marginal lands, which will require more fertilizer and be more prone to nutrient runoff and soil loss. As a result, the institute predicted, soil and nutrient losses from additional acreage would be “disproportionately larger than the rate at which acreage is bought into production.”
If demand for corn ethanol remains high, the WRI said in its paper, it will create market pressures for farmers to move “away from more environmentally benign rotations and tillage practices in favor of cropping practices that are more nitrogen and management intensive and that have greater negative environmental impacts.”
Corn and soybeans are typically rotated on a field because the continuous planting of corn leads to reduced production. Growing corn on a field two years in a row typically results in a 10– to 20-percent yield decline, according to the Center for Agriculture and Rural Development at Iowa State University.
But with more demand for corn, agricultural experts say that adjusting rotations to plant two years of corn with one year of soybeans would boost overall corn production enough to justify the change while minimizing—though not eliminating—the detrimental effects of planting continuous corn. Nonetheless, soil scientists say the reduced yields during the second year of corn would mean that a smaller amount of the fertilizer applied to the field would be used, increasing nutrient runoff.
The 5 percent national increase in nitrogen runoff predicted by the WRI is about the same percent increase that Simpson suggested is possible in the Bay watershed.
Right now, the watershed has about 9 million acres of agricultural land. About half of that is crops—mainly corn and soybeans. The rest is mostly pasture and hay.
Simpson’s calculation assumes a 1 million acre increase with roughly half coming out of soybean production and the other half out of hay, pasture and idled land such as CRP acreage being returned to production. Nitrogen runoff differences in a switch from soybeans to corn is relatively small, but changes from other land uses would result in substantially increased nitrogen losses.
Simpson, who is also chair of the Bay Program’s Nutrient Subcommittee, said the exact figure is not as important as the trajectory. “It’s a significant number going in the wrong direction,” he said.
(Nitrogen levels need to be reduced an additional 90 million pounds a year to reach the 175 million pound cleanup goal.)
He and others say that minimizing those losses would require an aggressive implementation of conservation measures, such as the planting of fall cover crops, which can help soak up unused nitrogen in the fields.
Demand for corn is increasing pressure to take land out of the USDA’s 2-decade-old Conservation Reserve Program, which pays farmers “rent” to take marginal and environmentally sensitive lands out of production. Hunting and wildlife groups have called CRP the “holy grail” of wildlife conservation, as it provides more habitat for birds and other species than all of the national wildlife refuges combined.
Although the vast majority of CRP land is in the Midwest, it—and the related Conservation Reserve Enhancement Program, which makes extra payments for restoration efforts on idled land—have been major factors in promoting streamside buffers in the Bay region.
In February, leading agricultural groups petitioned the USDA, asking that it allow 27 million of the 36.7 million acres of land in the Conservation Reserve Program be withdrawn without penalty and returned to production to help meet the demand for corn. A decision is expected later this year.
That could spur production on marginal lands in the watershed and reduce the amount of stream buffers. “CREP is getting a big enough payment that a farmer would have to think about whether they want to give up that payment,” Simpson said. “But with CRP, if it’s land that you can grow much on at all, it’s not a long thought.”
Mark O’Neill, a spokesman for Pennsylvania Farm Bureau, agreed that some CRP land will likely be tapped to meet demand. “We think agricultural land should be used for agricultural purposes,” he said.
High corn prices, O’Neill said, give farmers a chance to pay off debts accumulated by two decades of low or stagnant corn prices. “That does not mean that farmers are going to go out this year and get rich on corn. What it can do is help pay off past debt and hopefully earn a decent return.”
But with pressure to place land in production, it will be more difficult to set streamside buffers aside as filter strips to protect waterways from runoff. State tributary strategies, which guide Bay cleanup efforts, call for more than 570,000 miles of forested stream buffers, and 237,000 miles of grass buffers.
Through 2005, only 8 percent of the forest buffer goal and 22 percent of the grass buffer goal had been met. Officials say closing the gap will only get more difficult. “I’m happy for the farmers to see the $4 (per bushel) corn because that could preserve some agriculture in the state,” said Russ Perkinson, of the Virginia Department of Conservation and Recreation. “But that’s another side effect.”
Other likely casualties are pilot projects aimed at paying farmers a bonus to apply less-than-recommended amounts of fertilizer on corn. Corn produces huge yields when conditions are right, but in most years—when whether is too wet, dry or cloudy—production is reduced and more nutrients are left in the soil. The program, which is a part of several tributary strategies, sought to provide an incentive to fertilize for typical, rather than optimal yields. With increased corn prices, such programs are now a bigger financial risk for farmers, Simpson said.
In fact, Simpson and others worry that high prices will encourage growers to increase fertilizer applications to boost production. Others doubt that will happen because nitrogen fertilizer, made with increasingly expensive natural gas, is also at near record highs. Hutchinson, the Eastern Shore farmer, said the cost of nitrogen fertilizer, which was $182 a ton in December, had risen to $270 a ton by early March. “It was too high at $182, so we are not going to be putting any more out there than we think we can get a return from,” he said. “It’s just exploded in price.”
There are no ethanol plants in the region today, but that will soon change. Ethanol is problematic to transport by pipelines, in part because, unlike gasoline, it readily absorbs water that accumulates in the lines, making it harmful to engines. Further, the current pipeline system is not designed to move ethanol, primarily produced with Midwest corn, to coastal areas.
To meet renewable fuel requirements, more ethanol will be produced in this region. Last year, Pennsylvania announced the construction of a 108-million-gallon-a-year ethanol plant in Clearfield County. As many as seven more plants are in various stages of planning in the state.
Maryland is in the process of reviewing permits for the construction of its first plant, and two more are being planned.
Agri-Ethanol Products is constructing a 108-million-gallon per year ethanol plant in Aurora, NC, and has announced plans to build at least two more in the Virginia, North Carolina and South Carolina region.
Some of the corn for those plants may be grown in the region as farmers increase production. But the mid-Atlantic already imports corn from the Midwest, largely to meet the needs of chicken, hog and dairy operations. Much of the corn for ethanol plants will also have to be imported.
Because of the region’s distance from the Midwest corn belt, the economics for many animal operations in the region were already marginal, said Pease, the Virginia Tech economist. “This is another disadvantage that we are at in livestock production, and for poultry production in particular in our region,” he said.
The National Chicken Council reported that, nationwide, feeding costs for poultry increased $610 million from late October through February. Many expect that dairy operations in the region, which have fixed milk prices even as costs rise, are especially vulnerable.
“The disruption to the livestock industry is just phenomenal,” Pease said. “It is not able to be calculated.”
The economics behind a successful ethanol plant often call for the byproduct of ethanol production, called distillers grain, to be sold as animal feed. While that may seem like a boon to animal operations, distillers grain has limited food potential for many animals. Chickens and hogs can can digest only relatively small amounts of the byproduct.
Dairy cows can eat limited amounts, but distillers grain cannot fully take the place of corn. Too much distillers grains can depress the fat content, and value, of milk, according to animal nutritionists in the region.
More problematic is that ethanol production removes starch from the corn, but not nitrogen and phosphorus. The leftover feed has high levels of phosphorus relative to nitrogen. When fed to dairy cows at recommended levels, it can elevate the amount of phosphorus in manure.
That’s a problem because many agricultural lands have become saturated with phosphorus, making them more prone to runoff. States have increasingly mandated that manure be placed on land based on the ability of soil and crops to handle phosphorus — something that has caused manure to be hauled farther away and spread over more acres, which can be an added expense for farmers.
To reduce the problem, researchers, state agencies and environmental groups have been promoting “precision feeding,” which seeks to reduce phosphorus in dairy diets. With high corn prices and a growing amount of cheap distillers grain on the market, precision feeding—once presented to as a way to save money—is no longer economical for many farmers.
Even in Virginia, which has an incentive program that pays farmers $12 per cow each year they meet certain precision feeding goals, the incentive is overshadowed by savings from distillers grains. “For some farms, a certain degree of overfeeding phosphorus is going to be an economically rational decision,” said Katharine Knowlton, an associate professor of dairy science at Virginia Tech.
One animal that can thrive on distillers grain, though, is beef cattle. Because of the high price of corn in the region, most cattle in the region are reared primarily on pastures, which have relatively low amounts of nutrient runoff compared to many crop lands. But an influx of cheap distillers grain could cause a shift to more confined cattle operations with elevated nitrogen and phosphorus levels in their waste. “You couldn’t afford to ship grain to them before,” Simpson said.
The ethanol boom could bring changes that would benefit the region. High corn prices make it tempting to bring marginal land back into production because much of the region’s best farmland is now sprouting subdivisions and shopping centers.
Russ Brinsfield, director of the Maryland Center for Agro-Ecology, said higher prices could help save farmland. “To the extent that we are increasing the profitability of agriculture, farmers are less likely to get disgruntled and throw up their hands and sell out to developers,” said Brinsfield, who is also a farmer with plans to increase corn acreage this year. “Four dollar a bushel corn is a huge incentive for farmers to keep land in agriculture.”
Brinsfield said that while the region has little impact on national decisions, water quality impacts could be kept to a minimum if the region’s leaders aggressively promote proper nutrient use and the planting of cover crops in the fall.
On his Eastern Shore farm, Hutchinson is working on an experiment to grow barley to supplement the demand for corn-based ethanol. Barley has a lower energy value than corn, but has other benefits. For instance, it can be grown as a fall cover crop after corn is harvested to help absorb leftover nutrients on the field. Unlike other cover crops, it can provide income for farmers—if it can be used for ethanol.
“We want to figure out how to make that an advantage for everybody,” Hutchinson said.
Brian Snyder, executive direct or of the Pennsylvania Association for Sustainable Agriculture, said higher grain prices may encourage more dairy farmers to switch to grass-based operations. Dairy farms that rely on pastures rather than imported food typically produce less milk, but can be more profitable as they have lower operating costs because they need less equipment and grain. Also, their milk often commands premium prices.
Intensive grazing operations also tend to produce less nutrient runoff. “It will push many farms that may have been on the edge already to try grass-based systems,” Snyder said.
Knowlton said that ethanol plants may be able to adjust the nutrient content in their distillers grain so it more closely matches animal needs, creating a “value added” product that helps farmers and addresses environmental concerns. “It’s really an engineering problem,” she said. “I believe in the long run, this will play out.”
But the real hope is in cellulosic ethanol. Many see the short-term boost in corn production as part of a transition to ethanol from other products within a few years.
The chief candidate, touted from President Bush on down, is switchgrass, a native perennial grass that produces far more biomass per acre than corn, while requiring less effort to produce. Once switchgrass is planted, it can be harvested annually without replanting for decades. Its requires little fertilizer, can grow during droughts, and its extensive root system sharply reduces erosion and nutrient runoff.
In fact, some believe that switchgrass can even be planted and harvested on idled lands, including some Conservation Reserve Program acreage, with little environmental impact.
The catch: Technology to produce cellulosic ethanol remains largely a research issue. Corn-based ethanol technology has existed ever since the first still; people like Jack Daniels made a living making it. Creating ethanol from switchgrass and other cellulosic material require an added step to convert plant fibers into sugars that are more easily fermented. While several methods exist, they are not cost competitive with corn-based ethanol and gasoline.
But with the booming demand for renewable fuels, research money is pouring into cellulosic ethanol. The U.S. Department of Energy earlier this year announced grants to back six cellulosic refineries. The plant being build in Clearfield County, PA, will also have a cellulosic research operation.
Nonetheless, some are concerned that once the infrastructure for corn-based ethanol is established, transitioning to cellulosic ethanol will be difficult.
“What worries me is that people are continuing to focus on the ethanol from grain,” said George Wolff, a longtime Pennsylvania agricultural consultant who has been active in Bay issues. “I don’t think the acreage is here to do it. There are a lot of dreamers out there thinking they can do it, but I think we ought to be concentrating on how can we take care of the ethanol from biomass.”
Indeed, many argue that enough corn acreage does not exist to meet the nation’s renewable fuel goals. Further, corn has too many other uses—as an export commodity, and animal feed source—to serve as a long-term fuel source. Its susceptibility to droughts could make it an unreliable longtime source as well. “I do worry, from a farmer’s perspective, that it’s nonsustainable,” Simpson said.
Switchgrass, in contrast, provides a host of benefits, advocates contend. And while protecting waterways, it may provide additional revenue streams for farmers. Its vast root system is highly effective at sequestering carbon, and farmers may one day not only sell a renewable crop to refineries, but also sell credits to offset carbon emissions from power plants and factories.
If that happens, the “fuel of the future” may one day be a boon to both farmers and the Bay.