Saturday, May 10, 2008

Agriculture Secretary Ed Schafer yesterday said U.N. and other international aid officials are “flat-out wrong” to call U.S. ethanol production from corn a major factor in world food shortages and riots.

Mr. Schafer, a longtime proponent of biofuels, vehemently disputed efforts by the leaders of the World Bank and the U.N. World Food Program to blame ethanol for rising world food prices. He said his department calculates that competition between food and biofuels accounts only for up to 3 percent of food price increases.

“Only a very small portion of this problem is ethanol driven,” Mr. Schafer said in an interview with The Washington Times. Global food prices have risen 45 percent since mid-2007.

Mr. Schafer also said the administration will have an “uphill climb” to sustain President Bush’s promised veto of the farm bill compromise that Republicans and Democrats on Capitol Hill reached this week.

“Many Republican legislators in both houses … have indicated they’re going to vote to override the president,” he said, noting the lure of “money in their district.”

Mr. Schafer has become the administration’s point man for opposing the farm bill, arguing it does not sufficiently cut subsidies to high-income farmers.

“They’ve made it look good; they’ve said, ‘Oh, we put some limits on folks here,’ but the reality is they haven’t,” he said.

Mr. Schafer, a former governor of North Dakota who was sworn in as agriculture secretary in January, in the middle of the farm bill discussions, said farm income is projected to reach a record $92 billion this year, which is 50 percent higher than the average over the past 10 years.

He said continuing subsidies and adding new ones make no sense when farm incomes rise.

Congressional negotiators announced the outline of a compromise this week but the bill hasn’t been finalized.

Alise Kowalski, spokeswoman for Rep. Robert W. Goodlatte of Virginia, the top Republican on the House Agriculture Committee, said people should wait to see the measure before judging it.

“Without being able to read the text and without being able to see it, you can jump to a lot of conclusions,” she said.

Several lawmakers on Capitol Hill, including Mr. Goodlatte, have said they are waiting to hear Mr. Bush say he will veto the bill, rather than Mr. Schafer. But White House spokesman Scott Stanzell said the president stands by Mr. Schafer’s statement, and that Mr. Bush hasn’t spoken because he is in Texas for his daughter Jenna’s wedding.

Capitol Hill negotiators did try to move toward the Bush administration, cutting aid to higher-income farmers and landowners, but at hundreds of thousands of dollars higher than Mr. Bush’s target of $200,000 in annual gross income.

The bill would increase spending for food stamps and other emergency nutritional programs, boost funding for protecting farmland for conservation, and establish new disaster assistance for farmers. It would also slightly reduce the subsidy for corn-based ethanol for fuel while doubling the subsidy for production of cellulosic ethanol.

Mr. Schafer said the president will have a better chance of having his veto upheld by the House than by the Senate.

“That House, I think, is closer to the street, closer to the people in the grocery stores having tough times and wondering why we would do this,” he said.

Mr. Schafer has led the defense of the U.S. biofuels program, which has come under fire most notably from former top Bush administration officials.

World Bank President Robert B. Zoellick and U.N. World Food Program head Josette Sheeran, both of whom served as top officials at the State Department and U.S. Trade Representative’s Office, have said the switch to ethanol, which is made from grains, is raising the demand for staples such as wheat, rice and corn to record levels.

“I’m concerned about the fusing of food and fuel markets,” which pits moneyed energy interests against the world’s poor, Ms. Sheeran told the Peterson Institute for International Economics this week. “Energy bidders can outbid food buyers and, in a year of tight supplies, that’s having a bigger impact than it would ordinarily.”

And Jeffrey Sachs, a top adviser to U.N. Secretary-General Ban Ki-moon, said this week that the U.S. biofuels program, the world’s largest, represents a “huge blow to the world food supply.”

President Bush has ordered the Agriculture Department to release $200 million in emergency food aid to low-income countries struggling with higher food costs. The administration has also asked for $350 million in new food aid funding in the supplemental war-spending bill, and lawmakers may tack on even more.

But Mr. Schafer said that rising energy prices, drought in key producing regions, and rising demand from developing countries such as China and India have played a far more significant role than ethanol, adding that those strains on the world’s food networks can’t be solved overnight.

“Under our current models, we’re showing that we will see these levels of [food] prices for the next three years,” he said.

And the USDA had more bad news yesterday, releasing a report predicting that 2008 U.S. corn production could fall as much as 7 percent over last year. The report said wet weather in the corn belt delayed planting.

“What’s it mean ultimately? High food prices, for sure,” Don Roose, president of the Iowa trading firm U.S. Commodities, told the Associated Press, adding that the USDA projections were “actually kind of a bullish report” and the likeliest change is for production to fall even more.

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