While American corn planters rolled onward this spring, Cargill rolled forward with negotiations to build a dehydration facility in El Salvador that would convert Brazilian cane-based ethanol into fuel ethanol to be imported – tariff-free – into the United States.
Why? Why would Cargill move to import Brazilian (those pesky Brazilians!) ethanol as thousands of U.S. farmers lay out hundreds of millions of dollars to build ethanol plants across the cornbelt?
First, because globe-straddling, $60 billion Cargill can.
Second, it’s legal.
Under the recently announced Central America Free Trade Agreement (CAFTA), a “carve-out,” or special treatment, dating back to the 1984 Caribbean Basin Initiative (CBI), permits up to 7 percent of the previous year’s U.S. ethanol output to be imported duty free.
Ethanol flows in,That means 230 million gallons of the fuel additive could flow around tariff dams and into the United States in 2004.
As the United States moves toward its goal to produce 5 billion gallons by 2010, the tide of tariff-free ethanol could swell to 350 million gallons.
Third, Brazilian (those pesky Brazilians!) ethanol is three times cheaper than U.S. ethanol, about 60-cents per gallon compared to today’s American price of $1.80 per gallon.
World leader. Fourth, Brazil (those pesky … ) has the ethanol. It is the world leader in sugar production, ethanol production and ethanol exports. In 2003, Brazil harvested 350 million metric tons of cane, produced 3.6 billion gallons of ethanol and owned 50 percent of the global ethanol export market.
When the National Corn Growers Association got wind of Cargill’s plans, first reported by Reuters May 6, the group’s leaders vapor-locked.
NCGA and Cargill have longstanding ties, from Capitol Hill lobbying efforts on free trade, biotech and ethanol to Cargill’s participating in and partially funding NCGA events.
NCGA responds. NCGA took a few days to clear its carburetors before sending a “sharply” worded letter from its president, Dee Vaughn, to Cargill buddy and boss Gregory Page May 10.
After moaning about the global food giant’s motives (” … it is disheartening and curious …”), NCGA cut to the chase.
Today, 75 U.S. plants produce 3.2 billion gallons of ethanol and another 13 plants, with 500 million gallons capacity, are being built, Vaughn noted. “But Cargill is not investing in any of these facilities or in expansion of existing plants owned by the company.”
Also, “(T)he intent of the (CBI/CAFTA) carve-out was to promote economic development” in poor Latin American nations, “… not merely to serve as a vessel to enhance the bottom line of a multi-national company like Cargill.”
The punch line. Naiveté aside, Vaughn finally got to the punch line: “I fear Cargill’s actions will only further erode support for the agricultural trade agenda in the United States …” because “(w)hile NCGA supports an aggressive trade agenda, we cannot move faster or farther than our grassroots.”
If you reread those lines slowly, the flashpoint between NCGA and Cargill is not the threat of imported ethanol, Cargill’s bottom line or even the company’s ability to push long-time friends to the floor when big money beckons.
No, NCGA’s real “fear” is that Cargill’s intention to invest in imported ethanol threatens to undermine the friends’ collective goal of an “aggressive free trade agenda … faster and farther than our grassroots” are willing to go today.
Not now. In short, while both know free trade will bring cheaper Brazilian ethanol – and cheaper cotton, beef, wheat, soybeans, sugar, vegetables, poultry and pork – into the United States sooner or later, NCGA’s good old boys prefer it to be a little later than a little sooner and not ethanol at all.
But that’s not how it works with free trade. If you’re in for a pint today, you’re in for 350 million gallons tomorrow.
For the money. And when it comes to money, well, even old friends will hang you out to dry – or, as in this case, evaporate – in a Minnetonka minute.
Truth is, however, Cargill has every economic and legal right to move ahead with its ethanol import plan and agbiz toadying, knee-jerk free trade farm groups did most of the heavy lifting to make it not only possible, but likely.
And now they write letters.
(The author is a freelance ag journalist who lives in Delavan, Ill. He can be reached via e-mail at: AGuebert@worldnet.att.net. Read his columns online at www.farmanddairy.com.)
© 2004 ag comm