Are new rules mandated by the federal government to increase biofuels production causing food prices to rise?

U.S. biodiesel has a very small impact on food costs. In the past year, food prices have risen 5.1 percent. Only an estimated 0.2 - 0.6 percent of that total increase has been contributed to biofuels (biodiesel, ethanol, Cellulosic ethanol) production, according to the U.S. Department of Agriculture (USDA). The leading factor to higher food costs is the rising cost of crude oil, which over a four-year period, more than tripled from $40 a barrel to nearly $150 in July of 2008. Food often travels through multiple states, making it highly susceptible to fuel costs.

Is soybean meal meant for livestock feed being diverted to make biodiesel?

To recognize how little the production of biodiesel affects the food supply - for both consumers and livestock - it helps to understand the relationship between soybean oil and soybean meal. During processing for biodiesel, about 18 percent of a bushel of soy is extracted to create a natural oil. It's that natural oil that is used in biodiesel and the remaining 80 percent is left to make protein rich soybean meal. As a result, when demand is increased for soybean oil for use in biodiesel, the supply of soybean meal is actually increased. In fact, biodiesel produced from America's soybean farmers used less than 12 % of the nation's soybean harvest in 2007, and 81% of each soybean still went into protein markets to feed livestock and people.

While soy is the most common feedstock used today, biodiesel is truly a sustainable fuel that can be produced from various non-food crops and waste - even used kitchen grease.

How much of the inflation in food commodities is attributed to the production of biodiesel?

The primary factors responsible for global grain price inflation are: (1) higher crude oil prices - which have more than tripled from $40/barell to $150/barell (July 2008) - leading to increased costs to farmers for fertilizer, harvest and transportation; (2) increased demand as developing countries grow and people improve their diets; (3) two years of bad weather and drought leading to poor harvests in parts of the world; and, (4) export restrictions imposed by some countries.

Despite the higher energy costs, technological advances are allowing America's family farmers to produce much more efficient harvests. Before oil and gas prices hit new highs this year, 1974 held the dubious record for highest petroleum prices. And, like today, food prices naturally increased with the higher energy costs. However, despite the fact that gasoline and diesel prices are 30 percent higher now than they were in 1974 (after adjusting for inflation) the price for grains used in most biofuels are actually significantly lower in 2008 than they were in the 70s, according to U.S. Labor Department statistics. Thus demonstrating that it is the high price of energy and other factors that drive higher food prices, not greater demand for soy and other grains.

Speculation that spring floods would lessen the fall harvest also played a role. Now, ideal weather conditions in the Midwest have helped farmers recover and crop yields are up, which will eventually lead to lower wholesale prices for corn, soybeans and wheat. In fact, soybean prices have already dropped 17 percent over the summer.

Is the agriculture industry profiting on the rise of commodities prices at the expense of American consumers?

Cutting-edge techniques producing record crop yields, combined with a weak dollar improving export opportunities, are the primary reason many family farmers hope to turn a profit this year. However, like all families and businesses, the volatile price of energy continues to drive up their expenses and their potential for profits could erode.

On the other hand, many of the corporate food manufacturers like Campbell's, Kraft and Jimmy Dean, who compete for farmers' harvests, have announced huge profits this year. For example, Sara Lee announced an astounding $242 million profit during the third quarter of this year and a net increase in sales of more than 10%. The company acknowledges that their own higher product prices have driven those profits. More examples are illustrated in the following analysis: http://www.foodpricetruth.org/pdf/analysis.pdf

Many of the international food giants are members of the Grocery Manufacturers Association (GMA), which has been criticized for leading a heavily-funded campaign against biodiesel and other biofuels. Senator Chuck Grassley was forced to cancel a June meeting with GMA members after only one of 15 CEOs invited to explain the trade association's arguments against biofuels agreed to attend the discussion.

Are government mandates driving farmers to plant more soybean crops for use in biodiesel on land that is traditionally used for crops used in everyday groceries? And are farmers clearing more land for soybean crops, diminishing the positive effect natural plant life plays in climate control?

Despite a 52% increase in global consumption of soybean crops in the past decade, the growth in the world crop area harvested has only increased 6% over the same period. The fact is new technologies are allowing farmers to produce far greater yields on the same number of acres.

Furthermore, of the land that could be used for agriculture today, the United Nations Food and Agriculture Organization calculates that only 3.7 billion acres of the 10.4 billion acres are used. And of that total, only 1% of that farmland is used for crops that are utilized in the production of biofuels. Total land used for agriculture in the United States is predicted to remain constant or potentially be reduced through increases in farm production efficiency.

U.S. biodiesel industry initiatives have the potential to recycle commercial and agricultural wastes, bring sustainable agriculture to marginal lands, increase crop yields, and further lower pesticide and fertilizer applications. The National Biodiesel Board's Feedstock Development program is addressing production of arid variety crops, algae, waste greases, and other feedstocks on the horizon which have great potential to expand available materials for biodiesel in a sustainable manner.

Why are tax incentives for biodiesel necessary?

The additional tax revenues generated by a profitable U.S. biodiesel industry will be significantly larger than the value of the federal tax incentives currently provided to the industry. Assuming the existing volumetric biodiesel tax credit is extended past 2008, this program would cost a total of $3.5 billion by 2015. The industry will generate $8.3 billion of new revenue for the Federal Treasury for a positive net balance of $4.8 billion.

The most compelling case for the biodiesel tax incentive is that the current credit is already working. When it was enacted in 2004, the U.S. biodiesel industry produced 25 million gallons of fuel. That number rose to 500 million gallons in 2007. Last year, the U.S. biodiesel industry displaced 20 million barrels of petroleum, added over $4 billion to the U.S. economy, and supported over 21,000 jobs across the country. Biodiesel's annual contribution to reducing greenhouse gas emissions is now equal to removing 700,000 passenger vehicles from America's roadways. Assuming biodiesel growth reaches an estimated 650 million gallons by 2015, America's biodiesel industry will add an estimated $24 billion to the U.S. economy between 2005 and 2015.

Would a rollback of the mandates from the Renewable Fuel Standard (RFS) save American consumers money?

No. First, energy costs would be higher without biodiesel currently supplementing supply. In fact, biodiesel helps reduce energy costs that escalate food costs. Merrill Lynch commodities experts said in March that oil and gasoline prices would be about 15% higher if biofuels producers were not increasing their output. That would put oil at nearly $170 per barrel and U.S. gasoline prices could have surged to $4.73 per gallon, based upon July 2008 highs. As previously discussed, a leading factor in increased food costs is the rising cost of crude oil.

The bipartisan Energy Independence and Security Act of 2007 (EISA), enacted in December, 2007, significantly improved the Renewable Fuels Standard (RFS) and included a requirement to use 500 million gallons of biomass-based diesel in the United States in 2009. This requirement gradually increases to 1 billion gallons by 2012. Biodiesel is one of the fuels available in the marketplace today that will qualify as a biomass-based diesel.

What are the benefits of biodiesel production and use for American families?

National Security - Biodiesel Reduces our Dependence on Foreign Oil: Biodiesel can play a major role in expanding domestic refining capacity and reducing our reliance on foreign oil. The 500 million gallons of biodiesel produced in the U.S. in 2007 displaced 20 million barrels of petroleum, and increased production and use of biodiesel will further displace foreign oil. In addition, biodiesel is an extremely efficient fuel that creates 4.5 units of energy for every unit of fuel that is required to produce the fuel.

Cleaner Environment - Biodiesel is Proven to Reduce Dangerous Emissions, Which Contribute to Climate Change: Biodiesel is the only alternative fuel to voluntarily perform EPA Tier I and Tier II testing to quantify emission characteristics and health effects. That study found that B20 (20% biodiesel blended with 80% conventional diesel fuel) reduced total hydrocarbons by up to 30%, Carbon Monoxide up to 20%, and total particulate matter up to 15%. Research also documents the fact that the ozone forming potential of the hydrocarbon emissions of pure biodiesel is nearly 50% less than that of petroleum fuel. Pure biodiesel does not contain sulfur and therefore reduces sulfur dioxide exhaust from diesel engines to virtually zero.

Health Benefits - Biodiesel is Safer for People to Breathe: Research conducted in the US shows Biodiesel emissions have decreased levels of all target polycyclic aromatic hydrocarbons (PAH) and nitrited PAH compounds, as compared to petroleum diesel exhaust. PAH and nPAH compounds have been identified as potential cancer causing compounds. Targeted PAH compounds were reduced by 75 to 85 percent, with the exception of benzo(a)anthracene, which was reduced by roughly 50 percent. Target nPAH compounds were also reduced dramatically with biodiesel fuel, with 2-nitrofluorene and 1-nitropyrene reduced by 90 percent, and the rest of the nPAH compounds reduced to only trace levels. All of these reductions are due to the fact the Biodiesel fuel contains no aromatic compounds.

Since the vast majority of car owners in the United States don't own a diesel engine vehicle, how does biodiesel production help the average consumer?

Without biodiesel, gas prices would increase $.20 to $.35 per gallon, the U.S. Department of Energy estimates. For a typical household, that means biodiesel helps them save of about $150 to $300 per year. For the U.S. overall, this saves gas expenditures of $28 billion to $49 billion based on annual gasoline consumption of roughly 140 billion gallons.

Expanding the biodiesel industry to 650 million gallons by 2015 will displace 242 million barrels of crude oil between 2006 and 2015. This displacement will reduce the outflow of dollars largely to foreign oil producers by $13.6 billion over the 10-year period.

Does biodiesel use more energy to make than it gives back, thus eliminating any gains from lower emissions?

No. Biodiesel actually has the highest "energy balance" of any transportation fuel. A new analysis shows that the energy balance of biodiesel is a positive ratio of 3.5-to-1. For every unit of fossil energy needed to produce the fuel over its life cycle, the return is 4.5 units of energy, according to the research conducted at the University of Idaho in cooperation with the U.S. Department of Agriculture. The "energy balance" takes into account the planting, harvesting, fuel production and fuel transportation to the end user.