Partners for Progress

A conversation with NCGA leader Rick Tolman about markets, corn advancement and advocating for ethanol
By Kris Bevill | March 10, 2011

The stories from the '80s of “the still on the hill” built by farmers looking for a use for their piles of surplus corn are legendary. Corn growers and their organizations have been staunch promoters of ethanol since the beginning. EPM recently sat down with National Corn Growers Association CEO Rick Tolman to discuss the group’s current role in the ethanol industry and what lies ahead for corn growers and ethanol producers.
USDA’s most recent supply and demand report showed the carry-out-to-use ratio is at a 15-year low. How significant is this and should ethanol producers be concerned about their feedstock supply?

A: It is very significant. It's a situation that I don't think farmers are very comfortable with or ethanol producers. I'm not sure there's anybody that would like it to be quite that tight. It isn't cause for panic and unneeded policy response, it's very tight. We still have carryover. The nice thing about grain production is we have a Northern Hemisphere and a Southern Hemisphere so every six months we have the opportunity to replenish supplies. Even though we won't have a crop again until next fall, the Southern Hemisphere will be bringing in crop in the next few months. I'm assuming they will increase their production and that will help some. But it's tighter than I'm comfortable with and tighter than the majority of our farmers are comfortable with. It creates an opportunity—obviously it's good prices, good revenues, good returns. But in the long run, having it that tight stimulates the potential of policies and reaction that won’t be constructive.

Speaking of that, what role are speculators playing right now? Are we seeing a repeat of 2008?

A: I think we're seeing a repeat. There's striking parallels. We have seen speculation in a lot of other commodities—gold, silver, copper—and I think it reflects that the margin between having too little and too much, particularly in grains, is very narrow. We have available somewhere around 14 billion bushels of corn this year. If we had just a half billion more, that stocks-to-use ratio wouldn't be considered tight at all and prices would be a lot softer. It's a very narrow margin and I think speculators are smart enough to see an opportunity to help exacerbate that and make it swing another way. So I think they're playing a big role in this.
In 2008, prices went up quickly, but dropped quickly. Will it be the same this year?

A: Unless there are other events that are out of the ordinary, it'll be the same pattern. Farmers respond to high prices and produce more, not only here but around the world. I expect in 2011 we'll have a huge crop and produce enough to rebuild the stocks. Other countries will produce more grains because the prices are high and we'll have the same pattern. We get these wide swings because of that. It's a knife's edge between having too much and too little.
You’ve talked quite a bit about the food versus fuel debate. Is this an issue that will ever be resolved?

A: I think anytime we are above $5 to $6 a bushel it's going to raise the issue because it's an opportunity for the critics to draw on an emotional string with consumers. Probably in 2012-2013 it'll die down again, but I think we're going to have heck to pay over 2011.

Corn and Crops

Syngenta just announced approval for its genetically modified corn variety containing an enzyme used in the ethanol process. What do you think the approval of corn amylase will mean for corn growers and the ethanol industry?

A: For a long time, corn growers have had this vision of differentiating their product. As commodity producers they've done very well, but there's always been this desire to move up the value chain and differentiate. Amylase appears to be an opportunity, at least for some farmers, to partner with ethanol plants and produce what I'll call loosely a value-added product. It has more value than commodity corn, it's for a specific use, and employs some specialized management skills and techniques, and isn't something that has to meet industrial specifications. They can keep it in a closed-loop system and be rewarded for what they can do to add value. The value the ethanol plant gets, some of that can be shared with the farmer and they can move up the value chain.
The other thing that's important about it is it's really our first commercial biotechnology product that's not an agronomic product. While the other agronomic products have been great, they've been waiting for something beyond agronomics that gives more intrinsic value. So a lot of farmers see it as very symbolic.
How much outreach will need to be conducted to educate growers about this variety of corn and what role will ethanol plants play in this?

A: My understanding is that ethanol plants use the amylase in very small quantities with traditional corn. It acts as a catalyst and it takes relatively small amounts of it. So there's not going to be a lot of growers growing it in large amounts. It seems, again, more symbolic than really having a big impact for a large amount of farmers. But I think the way it'll work is the ethanol plants that want to use it will go out and contract with the individual farmers, so they'll do the training. They'll close the loop. It absolutely cannot get into the commodity channels, so there has to be very clear training. Growers have to grow it for a specific use. I think that'll kind of work itself out and I don't think it'll disrupt the other farmers who are doing commodity corn because whatever ethanol plants are using, the majority of corn that they buy will still be commodity corn. They just will buy certain small amounts of this amylase as a catalyst.
What is your take on corn stover as a feedstock? Are growers interested in utilizing it?

A: I think there's some tremendous opportunities there. There's some parameters and guidelines that we need to keep in mind. Obviously there is fertilizer value and organic material value in stover, so we have to figure out the sustainable amount that can be taken and used. Given our productivity, there is an increasing amount of biomass coming off each acre, so there’s an upside in certain situations to taking some of it away. It's going to vary by region and geography and climatic zone. But the advantages are we know there's already harvesting equipment going over the corn, so you don't have to create a new set of equipment or take another pass across the field. In some ways, it has a leg up on some of the other cellulosic systems because some of the infrastructure is already in place. I think, just like corn ethanol has been, it can be another catalyst to open up the market for other forms of cellulose. We're pretty optimistic about it. One more source of revenue for farming.
Do you have an opinion on other energy crops, like switchgrass or miscanthus, as a way for corn growers to utilize marginal land?

A: In concept, it has a lot of appeal. There are still some significant practical constraints that need to be worked out. You say “marginal land” and there's a reason it's marginal. It's either difficult to get to, not flat terrain, and the dilemma is: while some of these crops may grow well there, getting to them and harvesting them without damaging the environment is challenging. Those are some of the challenges we need to get over. I think there are some exciting opportunities, but you have to find the right niches not rutways to make it practical. So far, I haven't heard of many cost-effective ways to do dedicated energy crops on marginal land. And if you do it on land that's not marginal, then you're back into the food versus fuel argument because you're producing a crop that doesn't have any food value, it only has fuel value.

Promotions and Policy

What goals do the NCGA hope to achieve through the American Ethanol campaign?

A: It was a nice marriage because NASCAR is an American sport. The industry has had a relationship with the Indy Racing League which has been great, but that's an international sport. NASCAR has American values, they are rooted in American jobs, energy security, national security, so there was some nice dovetailing there with their messages and ours. They have loyal fans—70 million to 75 million. Before we signed on with them, they did a poll and asked what their fans thought about ethanol. And they got a lot of negative stuff back. So they said, "What if we at NASCAR told you that it is energy efficient, that it helps keep American jobs? What would you think now?" A very high proportion of the people said, “If NASCAR says that, we believe it." They have a lot of influence with their fans. They truly believe in ethanol, they've tested it. So we think it's a great opportunity for them and us to share messaging.

Another objective that's important to me personally is, we've continued to hear from the auto mechanic fraternity. They blame ethanol for everything. Now we can have the best mechanics in the world that work on these engines who are using it and who understand it. They're going to say, “Look, we use E15 in our 850 horsepower engine. Our engines cost $100,000. It works. It makes sense. It gives us more horsepower.” I think it'll add a lot more credibility to that auto mechanic fraternity and, I hope, squelch some of that scrutiny.

Do you feel you’ll be reaching a new audience through the American Ethanol campaign?

A: Yes. We looked carefully at [NASCAR’s] demographics and they're not very strong on the Coasts, but they’re very strong in the South, which is not our strong area. They're somewhat strong in the Midwest. They're hoping their relationship with us strengthens some of their audience in the Midwest. We're hoping to have more penetration in the South. And a lot of their listeners come from small towns and rural areas, but they're not farmers per se. So a lot of it will be a new audience. It'll be folks that have some affinity for the values that we're talking to them about, so we think we'll have an opportunity to have them respond positively to what we want to do. Plus, when you're talking about an audience of 70 million to 75 million fans, they're a group that's very passionate. When there's a need to do advocacy work, we think they'll be responsive to do that.

With Growth Energy now advocating for ethanol along with the established Renewable Fuels Association and American Coalition for Ethanol, how do you view the situation among the groups and what role does the NCGA want to play in ethanol policy?

A: The good thing is they all have individual strengths and their strengths are all complimentary. So when we can get everyone marching in the same direction there's great power there. I think that was shown in what we were able to do last fall when we four got together and decided we wanted a VEETC extension. And when we all marched up to Capitol Hill there was great power in a relatively short time in a dysfunctional Congress. We got that done. So we need to move to the next step.

There's very strong opinions among the groups, so our role is trying to bring them together, to be the sounding board for them and get them talking to one another. We meet as all four groups once a month and those [meetings] have been very useful.
What is the NCGA’s position this year on eliminating the blenders credit?

A: We and the ethanol groups went on record last year saying that we supported reform of the blenders credit. So now we're all trying to figure out what “reform” means. There are several proposals among the groups that are being championed and we're carefully reviewing those and weighing the pros and cons of each. Things like a phase-out or a variable credit or changing it to a producers credit are all things that are under discussion among the group. While we have opinions and ideas, the most important thing to us is unless all four groups get behind it, nothing's going to go anywhere. We're trying to bring some discussion down there and get some principles that everybody can sign off on and go together and work on it. The reform is there, we've committed to that. Now we just have to figure out what form that takes.
There’s been some movement in Congress to halt implementation of E15 and federal support for blender pump infrastructure build-out. Do you see these challenges gaining steam this year?

A: You can never discount any of those things that happen in Congress. This is a new Congress that we don't fully know the personality of yet. So you have to be very, very careful. Strange things happen in a dysfunctional Congress. Logically, I wouldn't think they'd go very far because blender pumps, for example, are nearly the ultimate opportunity for consumer choice. All along, the critics of ethanol have said, “Get away from government intervention and let the consumers choose.” We're saying, ”Yeah, let's do that. Let's get the infrastructure for market access and let the consumers choose.” Blender pumps are a key component of that. I think it's hard for them to find an argument against that.

But on the other hand, the critics are well-funded and seem to be well-organized, so you always have to be vigilant. I believe there are some very well-funded campaigns by those who are disadvantaged by renewable fuels and alternative energy and they're spending a lot of time and money looking for ways to stop the progress. Some of the craziest ideas, like indirect land use change, you think will never go anywhere, and they do. They seem to be throwing stuff up and if it sticks to the wall, they're going to go with it.

Author: Kris Bevill
Associate Editor, Ethanol Producer Magazine
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