Farm Fuel

March 3, 2005

Last September, a column headline in The Wall Street Journal sounded the alarm --- "Demand for oil could one day outstrip supply. "

The concern about energy supply has countries all over the world scrambling to get ahead of the problem. $2.00 gasoline here in the U.S. has our attention. Congress has been trying for over a year to pass energy legislation, but drilling in ANWAR and protection for MTBE manufacturers has stalled that effort.

But, that doesn't mean nothing is getting done. Ethanol production has doubled since 2001. Eleven percent of our corn crop is not eaten, it is converted into ethanol. Eleven percent of our corn is the same percent that our hogs eat. All of Brazilian gasoline contains 22% ethanol. In Brazil, alcohol exports are equal to their sugar exports. They make their ethanol from sugar cane. We make ours from corn. With oil at $50 per barrel there is a growing market for alternative sources of fuel throughout the world.

It doesn't stop with ethanol. Bio-diesel (although starting from a very low level) is the fastest growing alternative fuel in the U.S. Today, only about one-tenth of one-percent of our soybean crop is turned into bio-fuel. But, the future could be big. Looking back to Brazil that government just mandated that 10% of diesel fuel used in their cars would be soy bio-diesel. Someone needs to study the impact of such a mandate. It's gotta be huge. Eighty-percent of Brazilian cars run on diesel. How many bushels of soybeans will they need?

Turning our attention back to the U.S., we see a rapidly growing interest in blending bio-diesel with No.2 heating oil. With the cost of heating oil as high as it is, this could be a big market for our soybeans.

With the explosive global appetitive for energy, rising energy costs, and a desire to curtail our dependence on foreign oil, agriculture is positioned to be an important player in addressing these problems

Until next week, I am John Block from Washington.