February 25, 2011 / 12:18 AM / in 7 years

U.S. has "foot on the gas" on ethanol: Vilsack

WASHINGTON (Reuters) - The United States “can do it all” -- turn more corn into ethanol without running short of food, Agriculture Secretary Tom Vilsack said on Thursday, as oil prices soared and the government raised its forecast of food price increases this year.

“There is no reason for us to take the foot off the gas,” said Vilsack, referring to biofuels at a two-day Agriculture Department conference on the outlook for this year’s crops. “We can do it all.”

A record 5 billion bushels of corn will be used to make ethanol in the marketing year opening on Sept 1, up slightly from this year, said USDA. It also forecast food prices will rise 3.5 percent this year -- double the U.S. inflation rate.

Former president Bill Clinton, who spoke shortly after Vilsack, said there were stark trade-offs in using crops to make fuel. They affect the food supply in other nations as well as decisions around the world on where to grow crops.

“I think the best thing to say is we have to become energy independent but we don’t want to do it at the cost of food riots,” said Clinton. “The more biofuels we grow here, the less crops we have to put on the international market.”

Vilsack said biofuels are an important component to U.S. energy security that also boost rural employment and income. A 2007 law guarantees a rising share of the motor fuel market to ethanol, peaking at 15 billion gallons from 2015. Production is running at 13.5 billion gallons a year now.

U.S. farmers are capable of growing enough corn to meet rising demand for food, fuel, livestock feed and exports, he said. This year’s corn crop is projected for a record 13.73 billion bushels, up 10 percent from last year. Corn supplies are expected to be tight for one or two more years, however.

Clinton suggested annual reviews of supplies to assure there will be “good food at affordable prices,” to maximize energy independence and to prevent climate change but did not say who should carry out the reviews.

Analyst Gary Blumenthal of consultants World Perspectives said biofuel use reduces U.S. grain exports and “certainly is incentivizing production elsewhere.”

“The inequity in the situation is biofuel is a mandated market,” Blumenthal said. “You’re not allowing food to compete fairly with fuel” in buying supplies.

Dan Glickman, agriculture secretary during the Clinton era, said “by and large, it (ethanol) has a positive impact” on the economy and was only a small factor in food prices. Glickman said Clinton did not suggest government rationing or grain.

Some 4.95 billion bushels of corn are forecast to be turned into ethanol in the year ending Aug 31. Joe Glauber, USDA chief economist, said usage would rise marginally in the new year because ethanol is saturating the market at the 10 percent blend that is standard.

The Environmental Protection Agency has approved a 15 percent ethanol blend for cars and light trucks made since 2000, about 60 percent of the fleet. The U.S. House (of Representatives) voted last weekend to block EPA from implementing E15 and to bar use of federal funds to install “blender” pumps that dispense up to 85 percent ethanol in fuel, but the Senate has yet to act on such legislation.

Corn grower and ethanol trade groups said Clinton was wrong. There is plenty of fallow farmland that could be used for biofuels without harming the environment and that petroleum is a bigger factor in food prices, they said.

Oil prices rocketed above $100 a barrel on Thursday due to unrest in the Middle East but retreated slightly. U.S. crude oil settled at $97.28 a barrel after hitting its highest price since September 2008.

Reporting by Charles Abbott; Editing by David Gregorio

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