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US Ag Secretary Says Ethanol A Viable Biofuel

The home grown Biofuel ethanol has been taking a lot of flack lately. Questions are growing about its environmental sustainability, whether it's causing higher food prices, and how much of it will help the U.S. move toward energy independence. Acting U.S. Agriculture Secretary Chuck Connor, in Columbus Wednesday to address the Ohio Farm Bureau Federation, tried to lay some of the doubts about ethanol to rest.

Secretary Connor spent most of his time explaining to Farm Bureau members why the new farm bill has been bottled up in the Senate. But later he told reporters that high food inflation - up from the usual 2 1/2 percent to around 4 1/2 percent this year - has more to do with the cost of packaging and shipping things which are tied to high crude oil prices.

"We've acknowledged that some of that 4 1/2 percent is the result of ethanol production in this country," Connor says. "But we've also been quick to point out that it's been grossly overstated in terms of its impact. Only about 20, 19 percent of our actual consumer food dollar goes to the producer themselves. And so when producers are seeing a higher price, understand that the fast majority of that price really isn't relating to anything at the retail level."

Since last year there's been a dramatic drop in the profit margin for a gallon of ethanol. Plans for some refineries have been left on the drawing board. But Brent Porteus, a Coshocton County corn and livestock farmer and a Farm Bureau vice president says price fluctuations should be expected on the open market.

"It's a big picture thing but we're in a market situation now where we have significantly ramped up production and the price of corn is coming down as the market adjusts," Porteus says. "You know the market will make all these things work over time it's just as in any market you have to have these short term opportunities where prices need to move in one direction or another to bring the thing back into balance."

Agriculture Secretary Connor says he still sees a lot of what he calls "upside potential" for ethanol, especially since a federal mandate for a 10 percent ethanol blend has not been reached.

"I continue to see strong potential for demand out there, says Sec. Connor. "We use about 140 billion gallons of gasoline a year in this country. We have a ten percent blend mandate associated with that. We're still way short so I see tremendous demand potential just to get to that blend phase."

Beyond the 10 percent blend, Detroit is producing more and more flexible fuel cars that run on 85 percent ethanol 15 percent gasoline, which should further solidify ethanol's place in the Biofuels market.