Monday, August 31, 2009

Recession Finally Hits Down on the Farm

AUGUST 28, 2009

By SCOTT KILMAN and LAUREN ETTER, Wall Street Journal

The American farm, which has weathered the global recession better than most U.S. industries, is starting to succumb to the downturn.

The Agriculture Department forecast Thursday that U.S. farm profits will fall 38% this year, indicating that the slump is taking hold in rural America. Much of the sector had escaped the harsher aspects of the crisis, such as the big drop in property values plaguing city dwellers and suburbanites.

"It is safe to say that the global recession has finally shown up on the doorstep of the agriculture economy," said Michael Swanson, an agricultural economist at banking giant Wells Fargo & Co.

Oakley, Ill., farmer Mat Muirheid works in his corn field in May.The Agriculture Department said it expects net farm income -- a widely followed measure of profitability -- to drop to $54 billion in 2009, down $33.2 billion from last year's estimated net farm income of $87.2 billion, which was nearly a record high. The drop in farm prices is likely to lead to a slower increase in food costs for American consumers, economists say.

The slump isn't affecting all farmers equally: Many are still reaping big profits while others are having a hard year. Farmers are accustomed to seeing their incomes swing widely, due to the vagaries of such things as Mother Nature and the oil market's impact on the price of corn-derived ethanol fuel.

For instance, sugar farmers are seeing the highest global prices in 28 years, in part because of harvest problems in India. But many dairy and hog farmers are barely holding on because of low prices and shrinking foreign demand.

The sector's expected profit decline is unusually steep, coming after two boom years. According to USDA calculations, its 2009 forecast is $9 billion below the 10-year average for farm profits.

Jay Roebuck, a 52-year-old dairy farmer in Turner, Maine, said he is falling behind on bill payments even though he has laid off two workers and reduced the rations of his cows. "This is by far the worst it's ever been," said Mr. Roebuck, who estimates he is losing $9,000 monthly.

For most Americans, the chill in the farm belt is related to one of the few positives they see in this economy: slowing inflation. Prices farmers are receiving for corn, wheat and hogs are down sharply from last year. Partly as a result, economists expect the Consumer Price Index for food to rise 3% this year, compared with 5.5% in 2008, which was the fastest annual rise in 18 years.

Less than 1% of Americans are engaged directly in agriculture. Yet farmers have a big impact on the economy. They are big spenders, produce commodities that are ubiquitous in the economy, and use about half of the nation's land. According to past calculations by the USDA, agriculture and food account for about 13% of U.S. gross domestic product.

The profit drop signals that the decades-long contraction in the number of farmers who produce commodities such as hogs and milk is likely to accelerate this year.

Growers will probably cut back even more on their spending plans, making it harder for companies that sell such things as tractors, seeds and fertilizer to raise prices to farmers.

"There is likely to be more pressure on pricing," said Ann Duignan, an analyst at J.P. Morgan who follows farm-implement makers. She said Thursday that manufacturers will probably have the hardest time passing along higher costs to livestock operators, who are having the most financial difficulty.

The profit drop is a wrenching change for farmers, many of whom enjoyed the most profitable years of their careers in 2007 and 2008, when crop prices hit stratospheric levels. Fueled by rising federal mandates, the ethanol industry's appetite for corn exploded. At the same time, the growing middle class in emerging nations such as China was increasing its spending on U.S. farm goods like soybeans and pork.

Many farmers were able to reduce debts and increase savings, helping to insulate them from the recession in 2008.

Part of what had held the recession at bay in farm country earlier this year was that the prices of corn and soybeans, while down from last year's levels, were still roughly twice as high as what had been normal early this decade and in the 1990s. But prices of these commodities have steadily retreated in recent weeks amid forecasts for bumper harvests this fall.

U.S. corn farmers are projected to harvest about 12.8 billion bushels this fall, which would be the second-highest crop ever. Soybean farmers are expected to harvest a record 3.2 billion bushes. The price of corn and wheat is 41% lower than last year, while prices of hogs and nonfat dry milk are down one-third from 12 months ago.

Gene Gourley, who raises 60,000 hogs every year on his farm in Webster City, Iowa, is losing as much as $30 on each hog he sells. He said Thursday that he is rethinking plans to buy a trailer for hauling feed to his livestock. "With hogs losing so much money, you're basically burning up anything you could have saved," said Mr. Gourley. "You just don't have the equity to go buy new upgrades."

Before the recession, hog farmers enjoyed several years of good business in part because exports were booming to countries such as China.

When the recession took hold, restaurants cut orders for pork and foreign demand cooled. Pork exports in June were 36% lower than June 2008, according to USDA figures.

The decline in commodity prices also has begun to depress the value of U.S. farmland for the first time in two decades.

The Federal Reserve Bank of Chicago said in a report it issued Thursday that the price of good quality farmland in Iowa and Michigan was 5% lower on July 1 than it was on the same 2008 date.

Falling land prices are making it harder for farmers to borrow because land is their biggest source of collateral. "No question that specific industries are burning through working capital very quickly," said Bill York, chief executive of AgriBank FCB, St. Paul, Minn. "Pork and dairy are of particular concern."

Farmers, many of whom already receive federal subsidies, are seeking more help. Last month, the Obama administration said it will put an additional $243 million into the pockets of dairy farmers by temporarily raising the price the government pays for products such as cheese under its long-running dairy-price support program. Midwest governors are asking Washington to buy more pork for government nutrition programs in hopes that would raise hog prices.

The requests are likely to agitate critics of agricultural aid, who argue, among other things, that the average farmer is much wealthier than the typical U.S. household, and that U.S. subsidies put farmers in poor nations at a competitive disadvantage.

Write to Scott Kilman at scott.kilman@wsj.com and Lauren Etter at lauren.etter@wsj.com

Thursday, August 27, 2009

Peak Oil’s Marketing Problem

August 27, 2009

jenny goldstein, Earth Matters

This week’s Op-Ed in the New York Times titled “Peak Oil is a Waste of Energy” by energy consultant Michael Lynch was a virtual pandora’s box, judging from the number of comments left by readers. Any op-ed piece is self-evidently open for dispute, and dispute this one the New York Times’ readers did. I’m almost as fascinated by the smart, and largely negative, reactions to the piece as I am by Lynch’s anti-peak oil rhetoric itself.

Many scientists and social scientists take M. King Hubbert’s infamous bell-shaped “peak oil” curve as gospel on the planet’s finite oil reserves. And why not? If you trust that we are extracting oil at a faster rate than the earth produces it, then oil is a non-renewable resource. So it makes sense that at some point we, the oil drinkers, will hit rock-bottom and understandably, we want to know when that day will come.

The equation behind peak oil that Hubbert originally devised back in 1956 is deceivingly simple, though widely misunderstood. As Kenneth Deffeyes explains in his entirely readable Beyond Oil: The View from Hubbert’s Peak, Hubbert’s peak oil theory rests on the assumption that our ability to produce oil is linearly dependent on the fraction of oil remaining. In other words, the less oil that is left in the earth, the less we will be able to produce because what remains is harder to get at. What remains also ain’t cheap, though Hubbert never said much about prices.

What follows from this is Hubbert’s theory as an elegant equation. Without putting it in proper algebraic terms, Hubbert’s peak oil theory tells us that the peak of oil production occurs when half of a region’s oil has been recovered, and half remains. When a given geographical region’s—whether it’s the United States’, Saudi Arabia’s, or the world’s—cumulative oil production in relation to the fraction of oil remaining is plotted over time, beginning with any date on which the cumulative production of that region is known (e.g. in 1972 the US had produced a cumulative 100 billion barrels of oil), what emerges is a symmetrical bell-shaped curve. I happen to be extraordinarily bad at math, so I leave it at this: back in 1956, Hubbert predicted US oil production would start to decline in the 1970s. It did. When petroleum geologists apply his theory to global oil production, they come up with a year sometime…in our lifetime. The significance of this, however, is not that oil will disappear overnight or even seem less abundant. It’s that the real cost of oil will continue to increase.

As a skeptic of this proposition, Lynch calls attention to the fact that peak oil theory does a shoddy job of accounting for many other factors that influence global oil production, such as fluctuating demand, localized political disputes, and the discovery of new, however hard to reach, oil fields (see: current economic crisis, Nigeria, and 23,000 feet off the coast of Brazil for corresponding examples). He’s right, Hubbert never took any of those things into his calculations. Nor did Hubbert account for rising carbon dioxide in the atmosphere as a near-direct result of oil production and yet we still know how that’s turned out.

But peak oil isn’t just a theory, it’s also a gimmick. We’re missing the point if we debate the validity of the former rather than the latter. Lynch sets out to debunk peak oil, the theory, to which you either agree with his refuting points or stick squarely to Hubbert (so long as you know what Hubbert actually proposed), and concludes by advocating for low oil prices. It remains to be seen how successful he was at debunking Hubbert’s theory; I’m not sure that he was. But regardless of the holes in Hubbert’s theory, peak oil, the gimmick, still serves to remind us that some day the oil will be gone, out of our reach, or most likely of all, extraordinarily expensive. Peak oil, as a way of understanding the real costs–political, economic, environmental–embedded in oil production regardless of the day’s market price per barrel, needs to live on. Perhaps the gimmick has gotten stale, or never had a good ad campaign behind it anyway. Maybe it’s time for a new marketing strategy. Just don’t change peak oil’s point.

Jenny Goldstein

A native of New York and current resident of Santa Monica, CA, Jenny Goldstein is also a doctoral student in geography at the University of California, Los Angeles. She writes on and researches the interactions between local and global food systems, the politics of taste within the international coffee industry, and environmental conservation and development. She has conducted fieldwork in Rwanda, Ethiopia, Japan, and California. You can find her website at www.rootingforfruit.com.

U.S. Biofuel Boom Running on Empty

AUGUST 27, 2009

By ANN DAVIS and RUSSELL GOLD, Wall Street Journal

The biofuels revolution that promised to reduce America's dependence on foreign oil is fizzling out.

Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.

The global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of two of the three main biofuel sectors -- biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, is also in financial trouble, although longstanding government support will likely protect it.

Earlier this year, GreenHunter Energy Inc., operator of the nation's largest biodiesel refinery, stopped production and in June said it may have to sell its Houston plant, only a year after politicians presided over its opening. Dozens of other new biodiesel plants, which make a diesel substitute from vegetable oils and animal fats, have stopped operating because biodiesel production is no longer economical.

Producers of next-generation biofuels -- those using nonfood renewable materials such as grasses, cornstalks and sugarcane stalks -- are finding it tough to attract investment and ramp up production to an industrial scale. The sector suffered a major setback this summer after a federal jury ruled that Cello Energy of Alabama, a plant-fiber-based biofuel producer, had defrauded investors. Backed by venture capitalist Vinod Khosla, Cello was expected to supply 70% of the 100.7 million gallons of cellulosic biofuels that the Environmental Protection Agency planned to blend into the U.S. fuel supply next year. The alleged fraud will almost certainly prevent the EPA from meeting its targets next year, energy analysts say.

The wave of biodiesel failures and Cello's inability to produce even a fraction of what it expected have spooked private investors, which could further delay technology breakthroughs and derail the government's green energy objectives.

"If your investors are losing money in first-generation biofuels, I guarantee you they'll be more reluctant to put money into more biofuels, including next-generation fuels," says Tom Murray, global head of energy for German bank WestLB, one of the leading lenders to ethanol and biodiesel makers.

Domestically produced biofuels were supposed to be an answer to reducing America's reliance on foreign oil. In 2007, Congress set targets for the U.S. to blend 36 billion gallons of biofuels a year into the U.S. fuel supply in 2022, from 11.1 billion gallons in 2009. That would increase biofuels' share of the liquid-fuel mix to roughly 16% from 5%, based on U.S. Energy Information Administration fuel-demand projections.

Corn ethanol, which has been supported by government blending mandates and other subsidies for years, has come under fire for driving up the price of corn and other basic foodstuffs. While it will continue to be produced, corn ethanol's dominant role in filling the biofuels' blending mandate was set to shrink through 2022. Cellulosic ethanol, derived from the inedible portions of plants, and other advanced fuels were expected to surpass corn ethanol to fill close to half of all biofuel mandates in that time.

But the industry is already falling behind the targets. The EPA, which implements the congressional blending mandates, still hasn't issued any regulations to allow biodiesel blending, though they were supposed to start in January. The mandate to blend next-generation fuels, which kicks in next year, is unlikely to be met because of a lack of enough viable production.

"I don't believe there's a man, woman or child who believes the industry can hit" the EPA's 2010 biofuel blending targets, says Bill Wicker, spokesman for Sen. Jeff Bingaman of New Mexico, chairman of the Senate Energy Committee.

The business models for most biofuel companies were predicated on a much higher price of crude oil, making biofuels more attractive. A government-guaranteed market was also central to business plans.

But once blending mandates were postponed, oil prices plunged and the recession crushed fuel demand, many biodiesel companies started operating in the red. Even ethanol producers, which have enjoyed government subsidies and growing federal requirements to blend it into gasoline, have been operating at a loss over the past year. Numerous established producers have filed for Chapter 11 bankruptcy-court protection.

Critics of the biofuels boom say government support helped create the mess in the first place. In 2007, biofuels including ethanol received $3.25 billion in subsidies and support -- more than nuclear, solar or any other energy source, according to the Energy Information Administration. With new stimulus funding, this figure is expected to jump. New Energy Finance Ltd., an alternative-energy research firm, estimates that blending mandates alone would provide over $33 billion in tax credits to the biofuels industry from 2009 through 2013.

Not all biofuels may be worth the investment because they divert land from food crops, are expensive to produce and may be eclipsed by the electric car. One fact cited against biofuels: If the entire U.S. supply of vegetable oils and animal fats were diverted to make biodiesel, production still would amount to at most 7% of U.S. diesel demand.

Producers and investors now are pushing for swift and aggressive government help. Biodiesel makers are lobbying to kick-start the delayed blending mandates immediately and extend biodiesel tax credits, which expire in December.

On Aug. 7 more than two dozen U.S. senators wrote to President Barack Obama to warn that "numerous bankruptcies loom" in the biodiesel sector. "If this situation is not addressed immediately, the domestic biodiesel industry expects to lose 29,000 jobs in 2009 alone," the senators wrote, using estimates by the National Biodiesel Board.

Mr. Obama, who supported biofuels throughout his campaign, is working to roll out grants and loan guarantees for bio-refineries and green fuel projects, said Heather Zichal, a White House energy adviser. The pace of the disbursements should speed up this fall, administration officials say.

Obama officials defended the delay in biodiesel mandates. The EPA in May proposed rules that penalize soy-based diesel under the blending mandates, because deforestation from soybean cultivation is thought to offset the fuel's environmental benefits. Obama officials say the EPA must perform a thorough environmental review before it can issue rules. The amount of biodiesel that was to have been blended in 2009 will be added to the amount required for 2010, so that no volume is lost, they add.

Any state help might be too late for GreenHunter Energy. In 2007, the company, led by energy exploration executive Gary Evans, acquired a Houston refinery that processed used motor oil and chemicals and retrofit it to make 105 million gallons of biodiesel a year from all manner of feedstocks, from soybean oil and beef tallow to, potentially, inedible plant matter. GreenHunter's business model hinged on selling to a government-guaranteed buyer: GreenHunter has the capacity to make 20% of the 500 million gallons of biodiesel that Congress wanted to be blended into the 2009 fuel supply.

Until the mandate kicked in, GreenHunter and other biodiesel makers counted on exporting their output to Europe, a much bigger user of diesel.

GreenHunter opened in June 2008 as oil prices skyrocketed. By then, soybean oil prices were soaring, too, pinching refiners that had banked on using soy. Mr. Evans switched to inedible animal fats.

For about a month, when oil hovered above $120 a barrel and traditional diesel ran over $4 a gallon, GreenHunter says profit margins on turning animal fat into diesel rose as high as $1.25 a gallon. It wasn't sustainable. The price of animal fat soared too, cutting margins again.

As the EPA continued to delay the blending mandates, the global downturn obliterated demand for regular diesel. Prices cratered. GreenHunter's plant took a direct hit from Hurricane Ike in September. By the time the plant reopened in late November, the price of diesel had dropped by more than half, and GreenHunter was losing money on every gallon of fuel.

The European Union dealt the final blow this spring when it slapped a tariff on U.S. biodiesel, killing what had been the industry's main sales outlet.

GreenHunter has since stopped producing biodiesel. The American Stock Exchange informed GreenHunter in May that the company was out of compliance with some listing requirements; the firm has submitted a plan to remain listed. Its stock has sunk to about $2 a share from a high of $24.75 in May 2008.

Bio-refinery carcasses are everywhere. GreenHunter's lender, West LB, arranged $2 billion in ethanol and biodiesel loans, selling them to various investors beginning around 2006. Today, half of the $2 billion in loans have defaulted or are being restructured, according to people familiar with the portfolio. Publicly traded Nova Biosource Fuels Inc. filed for Chapter 11 bankruptcy reorganization in March.

Imperium Renewables, a biodiesel maker in Washington, is trying to hang on as a storage depot, its founder says. Evolution Fuels, an outfit that used to sell a biodiesel brand licensed by country singer Willie Nelson, has stopped production and said in a securities filing it may not be able to continue as a going concern. The company didn't return calls for comment.

Some senators have introduced a bill to extend biodiesel tax credits. A provision passed in the House grandfathers soy-based biodiesel into the blending mandates for five years.

Second-generation biofuels have had their own setbacks.

When seeking investors for Cello Energy in 2007, Jack Boykin, an entrepreneur with a background in biochemistry, said Cello had made diesel economically in a four-million-gallon-a-year pilot plant from grass, hay and used tires. What's more, he told investors he had successfully used the fuel in trucks, according to testimony in a federal court case in Mobile, Ala. He said he had invested $25 million of his own money. An Auburn University agronomy professor advising the Bush administration on green energy endorsed his technology.

Alabama paper-and-pulp executive George Landegger and Mr. Khosla, the venture capitalist, separately invested millions in seed money into Cello and had plans to invest or lend more.

A lawsuit disputing the ownership stakes of investors produced Mr. Boykin's revelation, in a 2008 deposition, that he had never used inedible plant material such as wood chips or grass in his pilot plant, despite claims otherwise. Construction of his full-scale facility in rural Alabama moved forward anyway.

This year, Khosla representatives took samples of diesel produced at the new Cello plant and sent them off for testing. The results showed no evidence of plant-based fuel: Carbon in the diesel was at least 50,000 years old, marking it as traditional fossil fuel.

The EPA wasn't told about the test, and continued to rely on Mr. Boykin's original claims when it asserted in the Federal Register in May that Cello could produce 70% of the cellulosic fuel targets set by Congress that are due to take effect next year.

The jury returned a $10.4 million civil fraud and breach-of-contract verdict against the Alabama entrepreneur in favor of Mr. Landegger, one of the investors. Work on the plant has been suspended. Several weeks after the verdict was delivered, Mr. Boykin presented evidence that he had tested fuel from the plant and it did contain cellulosic material. He is seeking a new trial.

Mr. Boykin declined to comment, but his lawyer, Forest Latta, said his client denies committing fraud. The carbon testing, he said, reflected only an early stage quality-control test during startup trials. It would be premature to conclude, Mr. Latta said in an email, that Cello's fuel-making process is a failure. "This is a first-of-its-kind plant in which there remain some mechanical issues still being ironed out," he wrote.

Margo Oge, director of the EPA's office on transportation and air quality, says the agency is "looking into the whole case of Cello." Mr. Khosla declined to discuss Cello, but said he doubts the 2010 cellulosic fuel mandates can be met. "All projects, even traditional well-established technologies, are being delayed because of the financial crisis," he said in an interview.

Write to Ann Davis at ann.davis@wsj.com and Russell Gold at russell.gold@wsj.com

More Sun for Less: Solar Panels Drop in Price

August 27, 2009

By KATE GALBRAITH, New York Times

For solar shoppers these days, the price is right. Panel prices have fallen about 40 percent since the middle of last year, driven down partly by an increase in the supply of a crucial ingredient for panels, according to analysts at the investment bank Piper Jaffray.

The price drops — coupled with recently expanded federal incentives — could shrink the time it takes solar panels to pay for themselves to 16 years, from 22 years, in places with high electricity costs, according to Glenn Harris, chief executive of SunCentric, a solar consulting group. That calculation does not include state rebates, which can sometimes improve the economics considerably.

American consumers have the rest of the world to thank for the big solar price break.

Until recently, panel makers had been constrained by limited production of polysilicon, which goes into most types of panels. But more factories making the material have opened, as have more plants churning out the panels themselves — especially in China.

“A ton of production, mostly Chinese, has come online,” said Chris Whitman, the president of U.S. Solar Finance, which helps arrange bank financing for solar projects.

At the same time, once-roaring global demand for solar panels has slowed, particularly in Europe, the largest solar market, where photovoltaic installations are forecast to fall by 26 percent this year compared with 2008, according to Emerging Energy Research, a consulting firm. Much of that drop can be attributed to a sharp slowdown in Spain. Faced with high unemployment and an economic crisis, Spain slashed its generous subsidy for the panels last year because it was costing too much.

Many experts expect panel prices to fall further, though not by another 40 percent.

Manufacturers are already reeling from the price slump. For example, Evergreen Solar, which is based in Massachusetts, recently reported a second-quarter loss that was more than double its loss from a year earlier.

But some manufacturers say that cheaper panels could be a good thing in the long term, spurring enthusiasm among customers and expanding the market.

“It’s important that these costs and prices do come down,” said Mike Ahearn, the chief executive of First Solar, a panel maker based in Tempe, Ariz.

First Solar recently announced a deal to build two large solar arrays in Southern California to supply that region’s dominant utility. But across the United States, the installation of large solar systems — the type found on commercial or government buildings — has been hurt by financing problems, and is on track to be about the same this year as in 2008, according to Emerging Energy Research.

The smaller residential sector continues to grow: In California, by far the largest market in the country, residential installations in July were up by more than 50 percent compared with a year earlier. With prices dropping, that momentum looks poised to continue.

Expanded federal incentives have also helped spur the market. Until this year, homeowners could get a 30 percent tax credit for solar electric installations, but it was capped at $2,000. That cap was lifted on Jan. 1.

Tuesday, August 25, 2009

Ancient Seeds for Modern Needs

Native Seeds/SEARCH conserves, distributes and documents the adapted and diverse varieties of agricultural seeds, their wild relatives and the role these seeds play in cultures of the American Southwest and northwest Mexico. Native Seeds/SEARCH (“NS/S”) promotes the use of these ancient crops and their wild relatives by gathering, safeguarding, and distributing their seeds to farming and gardening communities. They also work to preserve knowledge about their uses.

On December 19, 1997, NS/S and The Nature Conservancy (TNC) each purchased a portion of a 160-acre farm in Patagonia, Arizona. NS/S bought 60-acres of rich flood plain fields away from the creeks and TNC purchased the remaining 100 acres of farm, including the creek bottom and neighboring corridor of native Sacaton grass and cottonwood trees. While TNC would work to preserve the Sonoita Creek riparian corridor running through its newly acquired land, NS/S would use the flood plain fields to grow and conserve native crops.

The first grow-out occurred in the summer of 1998. Beginning with 1-acre of land, NS/S grew about 40 different accessions of crops. Weeds were by far the biggest challenge. Weeds and the 2-hour round-trip daily commute from Tucson! Since then, they have continued to increase both the number of acres being managed as well as the number of crops being grown each year. A typical season consists of regenerating between 200 and 350 accessions on 12-15 acres, seed increase, and growing crops identified for specific projects, such as seed stock for Tarahumara farmers in the Sierra Madre or a new seed bank initiative at Hopi. Remaining fields are covered cropped, often with cereal/legume mixes to add nutrients and organic matter to our soils.

Though once inhabited by the Sobapuri Indians, the fields NS/S now uses to grow native crops were used to grow everything from alfalfa to zucchini during the 1960’s and 1970’s. With deep sandy loam soils, abundant summer rainfall and mild temperatures; the Conservation Farm has proven an ideal location for growing the wide diversity of crops maintained in their seedbank.

Cultural Memory Banking

Cultural memory banking, a term coined by anthropologist Virginia Nazarea, recognizes the intimate link existing between human cultures and their crops. In the southwestern US and northwestern Mexico, farmers are the keepers of many traditions. Unfortunately, they are becoming a diminishing force in many communities. Fewer and fewer youths move into the agricultural sector, choosing instead to pursue educational or job opportunities elsewhere. Thus, the knowledge associated with planting, cultivating, harvesting, and using the crops long associated with these cultures is at risk of being lost. Though seed banks conserve germplasm, they do not typically also conserve the traditional knowledge that develops over generations of agricultural practice – knowledge that would enrich our understanding of how a crop was cultivated and utilized within a community and hopefully provide critical insight on managing these resources for future generations.

In the late 1990s, NS/S undertook to expand their seed bank efforts to include a cultural component, integrating cultural information – the agricultural practices, stories, songs, and recipes associated with specific crops in the seed bank – with their existing database of collection information. In effect, they would combine the geneticist's concern for conserving unique traits of a crop with a folklorist's concern for conserving oral history about the crop.

NS/S started by returning to interview farmers from whom early collections of seed had been made by NS/S staff. From August 1997 to 1999, trips were made to interview Navajo, Mt. Pima, Tarahumara and Tohono O’odham farmers and elders. NS/S asked each farmer what types of crops they grew, how each was grown, how they located their fields and knew when to plant, how they chose which seeds to save for planting and how they were stored from year to year, and how each crop was used, including cooking techniques and recipes.

As originally intended, the CMB would have been primarily an in-house resource, accessed via their computers. But information gleaned from conversations before, during and after the interview process suggested an alternative application: the information NS/S was gathering was of most importance to the communities with whom they were talking! That is, it was more critical that Native American farmers and youths learn about their own agricultural traditions than it was that NS/S document them. Thus was born the idea of refocusing the goals of the CMB project in such a way as to ensure that the information NS/S was collecting would go back to the communities that would benefit most from that same information.

‘Peak Oil’ Is a Waste of Energy

August 25, 2009

Op-Ed Contributor, New York Times

By MICHAEL LYNCH

Amherst, Mass.

REMEMBER “peak oil”? It’s the theory that geological scarcity will at some point make it impossible for global petroleum production to avoid falling, heralding the end of the oil age and, potentially, economic catastrophe. Well, just when we thought that the collapse in oil prices since last summer had put an end to such talk, along comes Fatih Birol, the top economist at the International Energy Agency, to insist that we’ll reach the peak moment in 10 years, a decade sooner than most previous predictions (although a few ardent pessimists believe the moment of no return has already come and gone).

Like many Malthusian beliefs, peak oil theory has been promoted by a motivated group of scientists and laymen who base their conclusions on poor analyses of data and misinterpretations of technical material. But because the news media and prominent figures like James Schlesinger, a former secretary of energy, and the oilman T. Boone Pickens have taken peak oil seriously, the public is understandably alarmed.

A careful examination of the facts shows that most arguments about peak oil are based on anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum. And this has been demonstrated over and over again: the founder of the Association for the Study of Peak Oil first claimed in 1989 that the peak had already been reached, and Mr. Schlesinger argued a decade earlier that production was unlikely to ever go much higher.

Mr. Birol isn’t the only one still worrying. One leading proponent of peak oil, the writer Paul Roberts, recently expressed shock to discover that the liquid coming out of the Ghawar Field in Saudi Arabia, the world’s largest known deposit, is around 35 percent water and rising. But this is hardly a concern — the buildup is caused by the Saudis pumping seawater into the field to keep pressure up and make extraction easier. The global average for water in oil field yields is estimated to be as high as 75 percent.

Another critic, a prominent consultant and investor named Matthew Simmons, has raised concerns over oil engineers using “fuzzy logic” to estimate reservoir holdings. But fuzzy logic is a programming method that has been used since I was in graduate school in situations where the factors are hazy and variable — everything from physical science to international relations — and its track record in oil geology has been quite good.

But those are just the latest arguments — for the most part the peak-oil crowd rests its case on three major claims: that the world is discovering only one barrel for every three or four produced; that political instability in oil-producing countries puts us at an unprecedented risk of having the spigots turned off; and that we have already used half of the two trillion barrels of oil that the earth contained.

Let’s take the rate-of-discovery argument first: it is a statement that reflects ignorance of industry terminology. When a new field is found, it is given a size estimate that indicates how much is thought to be recoverable at that point in time. But as years pass, the estimate is almost always revised upward, either because more pockets of oil are found in the field or because new technology makes it possible to extract oil that was previously unreachable. Yet because petroleum geologists don’t report that additional recoverable oil as “newly discovered,” the peak oil advocates tend to ignore it. In truth, the combination of new discoveries and revisions to size estimates of older fields has been keeping pace with production for many years.

A related argument — that the “easy oil” is gone and that extraction can only become more difficult and cost-ineffective — should be recognized as vague and irrelevant. Drillers in Persia a century ago certainly didn’t consider their work easy, and the mechanized, computerized industry of today is a far sight from 19th-century mule-drawn rigs. Hundreds of fields that produce “easy oil” today were once thought technologically unreachable.

The latest acorn in the discovery debate is a recent increase in the overall estimated rate at which production is declining in large oil fields. This is assumed to be the result of the “superstraw” technologies that have become dominant over the past decade, which can drain fields faster than ever. True, because quicker extraction causes the fluid pressure in the field to drop rapidly, the wells become less and less productive over time. But this declining return on individual wells doesn’t necessarily mean that whole fields are being cleaned out. As the Saudis have proved in recent years at Ghawar, additional investment — to find new deposits and drill new wells — can keep a field’s overall production from falling.

When their shaky claims on geology are exposed, the peak-oil advocates tend to argue that today’s geopolitical instability needs to be taken into consideration. But political risk is hardly new: a leading Communist labor organizer in the Baku oil industry in the early 1900s would later be known to the world as Josef Stalin.

When the large supply disruptions of 1973 and 1979 led to skyrocketing prices, nearly all oil experts said the underlying cause was resource scarcity and that prices would go ever higher in the future. The oil companies diversified their investments — Mobil even started buying up department stores! — and President Jimmy Carter pushed for the development of synthetic fuels like shale oil, arguing that markets were too myopic to realize the imminent need for substitutes. All sorts of policy wonks, energy consultants and Nobel-prize-winning economists jumped on the bandwagon to explain that prices would only go up — even though they had never done so historically. Prices instead proceeded to slide for two decades, rather as the tide ignored King Canute.

Just as, in the 1970s, it was the Arab oil embargo and the Iranian Revolution, today it is the invasion of Iraq and instability in Venezuela and Nigeria. But the solution, as ever, is for the industry to shift investment into new regions, and that’s what it is doing. Yet peak-oil advocates take advantage of the inevitable delay in bringing this new production on line to claim that global production is on an irreversible decline.

In the end, perhaps the most misleading claim of the peak-oil advocates is that the earth was endowed with only 2 trillion barrels of “recoverable” oil. Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10 percent of it was considered recoverable, but improvements in technology should allow us to recover some 35 percent — another 2.5 trillion barrels — in an economically viable way. And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap.

Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota. But that may not keep the Chicken Littles from convincing policymakers in Washington and elsewhere that oil, being finite, must increase in price. (That’s the logic that led the Carter administration to create the Synthetic Fuels Corporation, a $3 billion boondoggle that never produced a gallon of useable fuel.)

This is not to say that we shouldn’t keep looking for other cost-effective, low-pollution energy sources — why not broaden our options? But we can’t let the false threat of disappearing oil lead the government to throw money away on harebrained renewable energy schemes or impose unnecessary and expensive conservation measures on a public already struggling through tough economic times.

Michael Lynch, the former director for Asian energy and security at the Center for International Studies at the Massachusetts Institute of Technology, is an energy consultant

Monday, August 24, 2009

Getting Real About the High Price of Cheap Food

Friday, Aug. 21, 2009

By Bryan Walsh, Time Magazine

Somewhere in Iowa, a pig is being raised in a confined pen, packed in so tightly with other swine that their curly tails have been chopped off so they won't bite one another. To prevent him from getting sick in such close quarters, he is dosed with antibiotics. The waste produced by the pig and his thousands of pen mates on the factory farm where they live goes into manure lagoons that blanket neighboring communities with air pollution and a stomach-churning stench. He's fed on American corn that was grown with the help of government subsidies and millions of tons of chemical fertilizer. When the pig is slaughtered, at about 5 months of age, he'll become sausage or bacon that will sell cheap, feeding an American addiction to meat that has contributed to an obesity epidemic currently afflicting more than two-thirds of the population. And when the rains come, the excess fertilizer that coaxed so much corn from the ground will be washed into the Mississippi River and down into the Gulf of Mexico, where it will help kill fish for miles and miles around. That's the state of your bacon — circa 2009.

Horror stories about the food industry have long been with us — ever since 1906, when Upton Sinclair's landmark novel The Jungle told some ugly truths about how America produces its meat. In the century that followed, things got much better, and in some ways much worse. The U.S. agricultural industry can now produce unlimited quantities of meat and grains at remarkably cheap prices. But it does so at a high cost to the environment, animals and humans. Those hidden prices are the creeping erosion of our fertile farmland, cages for egg-laying chickens so packed that the birds can't even raise their wings and the scary rise of antibiotic-resistant bacteria among farm animals. Add to the price tag the acceleration of global warming — our energy-intensive food system uses 19% of U.S. fossil fuels, more than any other sector of the economy.

And perhaps worst of all, our food is increasingly bad for us, even dangerous. A series of recalls involving contaminated foods this year — including an outbreak of salmonella from tainted peanuts that killed at least eight people and sickened 600 — has consumers rightly worried about the safety of their meals. A food system — from seed to 7‑Eleven — that generates cheap, filling food at the literal expense of healthier produce is also a principal cause of America's obesity epidemic. At a time when the nation is close to a civil war over health-care reform, obesity adds $147 billion a year to our doctor bills. "The way we farm now is destructive of the soil, the environment and us," says Doug Gurian-Sherman, a senior scientist with the food and environment program at the Union of Concerned Scientists (UCS).

Some Americans are heeding such warnings and working to transform the way the country eats — ranchers and farmers who are raising sustainable food in ways that don't bankrupt the earth. Documentaries like the scathing Food Inc. and the work of investigative journalists like Eric Schlosser and Michael Pollan are reprising Sinclair's work, awakening a sleeping public to the uncomfortable realities of how we eat. Change is also coming from the very top. First Lady Michelle Obama's White House garden has so far yielded more than 225 lb. of organic produce — and tons of powerful symbolism. But hers is still a losing battle. Despite increasing public awareness, sustainable agriculture, while the fastest-growing sector of the food industry, remains a tiny enterprise: according to the most recent data from the U.S. Department of Agriculture (USDA), less than 1% of American cropland is farmed organically. Sustainable food is also pricier than conventional food and harder to find. And while large companies like General Mills have opened organic divisions, purists worry that the very definition of sustainability will be co-opted as a result.

But we don't have the luxury of philosophizing about food. With the exhaustion of the soil, the impact of global warming and the inevitably rising price of oil — which will affect everything from fertilizer to supermarket electricity bills — our industrial style of food production will end sooner or later. As the developing world grows richer, hundreds of millions of people will want to shift to the same calorie-heavy, protein-rich diet that has made Americans so unhealthy — demand for meat and poultry worldwide is set to rise 25% by 2015 — but the earth can no longer deliver. Unless Americans radically rethink the way they grow and consume food, they face a future of eroded farmland, hollowed-out countryside, scarier germs, higher health costs — and bland taste. Sustainable food has an élitist reputation, but each of us depends on the soil, animals and plants — and as every farmer knows, if you don't take care of your land, it can't take care of you.

The Downside of Cheap


For all the grumbling you do about your weekly grocery bill, the fact is you've never had it so good, at least in terms of what you pay for every calorie you eat. According to the USDA, Americans spend less than 10% of their incomes on food, down from 18% in 1966. Those savings begin with the remarkable success of one crop: corn. Corn is king on the American farm, with production passing 12 billion bu. annually, up from 4 billion bu. as recently as 1970. When we eat a cheeseburger, a Chicken McNugget, or drink soda, we're eating the corn that grows on vast, monocrop fields in Midwestern states like Iowa.

But cheap food is not free food, and corn comes with hidden costs. The crop is heavily fertilized — both with chemicals like nitrogen and with subsidies from Washington. Over the past decade, the Federal Government has poured more than $50 billion into the corn industry, keeping prices for the crop — at least until corn ethanol skewed the market — artificially low. That's why McDonald's can sell you a Big Mac, fries and a Coke for around $5 — a bargain, given that the meal contains nearly 1,200 calories, more than half the daily recommended requirement for adults. "Taxpayer subsidies basically underwrite cheap grain, and that's what the factory-farming system for meat is entirely dependent on," says Gurian-Sherman.

So what's wrong with cheap food and cheap meat — especially in a world in which more than 1 billion people go hungry? A lot. For one thing, not all food is equally inexpensive; fruits and vegetables don't receive the same price supports as grains. A study in the American Journal of Clinical Nutrition found that a dollar could buy 1,200 calories of potato chips or 875 calories of soda but just 250 calories of vegetables or 170 calories of fresh fruit. With the backing of the government, farmers are producing more calories — some 500 more per person per day since the 1970s — but too many are unhealthy calories. Given that, it's no surprise we're so fat; it simply costs too much to be thin.

Our expanding girth is just one consequence of mainstream farming. Another is chemicals. No one doubts the power of chemical fertilizer to pull more crop from a field. American farmers now produce an astounding 153 bu. of corn per acre, up from 118 as recently as 1990. But the quantity of that fertilizer is flat-out scary: more than 10 million tons for corn alone — and nearly 23 million for all crops. When runoff from the fields of the Midwest reaches the Gulf of Mexico, it contributes to what's known as a dead zone, a seasonal, approximately 6,000-sq.-mi. area that has almost no oxygen and therefore almost no sea life. Because of the dead zone, the $2.8 billion Gulf of Mexico fishing industry loses 212,000 metric tons of seafood a year, and around the world, there are nearly 400 similar dead zones. Even as we produce more high-fat, high-calorie foods, we destroy one of our leanest and healthiest sources of protein.

The food industry's degradation of animal life, of course, isn't limited to fish. Though we might still like to imagine our food being raised by Old MacDonald, chances are your burger or your sausage came from what are called concentrated-animal feeding operations (CAFOs), which are every bit as industrial as they sound. In CAFOs, large numbers of animals — 1,000 or more in the case of cattle and tens of thousands for chicken and pigs — are kept in close, concentrated conditions and fattened up for slaughter as fast as possible, contributing to efficiencies of scale and thus lower prices. But animals aren't widgets with legs. They're living creatures, and there are consequences to packing them in prison-like conditions. For instance: Where does all that manure go?

Pound for pound, a pig produces approximately four times the amount of waste a human does, and what factory farms do with that mess gets comparatively little oversight. Most hog waste is disposed of in open-air lagoons, which can overflow in heavy rain and contaminate nearby streams and rivers. "This creek that we used to wade in, that creek that our parents could drink out of, our kids can't even play in anymore," says Jayne Clampitt, a farmer in Independence, Iowa, who lives near a number of hog farms.

To stay alive and grow in such conditions, farm animals need pharmaceutical help, which can have further damaging consequences for humans. Overuse of antibiotics on farm animals leads, inevitably, to antibiotic-resistant bacteria, and the same bugs that infect animals can infect us too. The UCS estimates that about 70% of antimicrobial drugs used in America are given not to people but to animals, which means we're breeding more of those deadly organisms every day. The Institute of Medicine estimated in 1998 that antibiotic resistance cost the public-health system $4 billion to $5 billion a year — a figure that's almost certainly higher now. "I don't think CAFOs would be able to function as they do now without the widespread use of antibiotics," says Robert Martin, who was the executive director of the Pew Commission on Industrial Farm Animal Production.

The livestock industry argues that estimates of antibiotics in food production are significantly overblown. Resistance "is the result of human use and not related to veterinary use," according to Kristina Butts, the manager of legislative affairs for the National Cattlemen's Beef Association. But with wonder drugs losing their effectiveness, it makes sense to preserve them for as long as we can, and that means limiting them to human use as much as possible. "These antibiotics are not given to sick animals," says Representative Louise Slaughter, who is sponsoring a bill to limit antibiotic use on farms. "It's a preventive measure because they are kept in pretty unspeakable conditions."

Such a measure would get at a symptom of the problem but not at the source. Just as the burning of fossil fuels that is causing global warming requires more than a tweaking of mileage standards, the manifold problems of our food system require a comprehensive solution. "There should be a recognition that what we are doing is unsustainable," says Martin. And yet, still we must eat. So what can we do?

Getting It Right

If a factory farm is hell for an animal, then Bill Niman's seaside ranch in Bolinas, Calif., an hour north of San Francisco, must be heaven. The property's cliffside view over the Pacific Ocean is worth millions, but the black Angus cattle that Niman and his wife Nicolette Hahn Niman raise keep their eyes on the ground, chewing contentedly on the pasture. Grass — and a trail of hay that Niman spreads from his truck periodically — is all the animals will eat during the nearly three years they'll spend on the ranch. That all-natural, noncorn diet — along with the intensive, individual care that the Nimans provide their animals — produces beef that many connoisseurs consider to be among the best in the world. But for Niman, there is more at stake than just a good steak. He believes that his way of raising farm animals — in the open air, with no chemicals or drugs and with maximum care — is the only truly sustainable method and could be a model for a better food system. "What we need in this country is a completely different way of raising animals for food," says Hahn Niman, a former attorney for the environmental group Earthjustice. "This needs to be done in the right way."

The Nimans like to call what they do "beyond organic," and there are some signs that consumers are beginning to catch up. This November, California voters approved a ballot proposition that guarantees farm animals enough space to lie down, stand up and turn around. Worldwide, organic food — a sometimes slippery term but on the whole a practice more sustainable than conventional food — is worth more than $46 billion. That's still a small slice of the overall food pie, but it's growing, even in a global recession. "There is more pent-up demand for organic than there is production," says Bill Wolf, a co-founder of the organic-food consultancy Wolf DiMatteo and Associates.

So what will it take for sustainable food production to spread? It's clear that scaling up must begin with a sort of scaling down — a distributed system of many local or regional food producers as opposed to just a few massive ones. Since 1935, consolidation and industrialization have seen the number of U.S. farms decline from 6.8 million to fewer than 2 million — with the average farmer now feeding 129 Americans, compared with 19 people in 1940.

It's that very efficiency that's led to the problems and is in turn spurring a backlash, reflected not just in the growth of farmers' markets or the growing involvement of big corporations in organics but also in the local-food movement, in which restaurants and large catering services buy from suppliers in their areas, thereby improving freshness, supporting small-scale agriculture and reducing the so-called food miles between field and plate. That in turn slashes transportation costs and reduces the industry's carbon footprint.

A transition to more sustainable, smaller-scale production methods could even be possible without a loss in overall yield, as one survey from the University of Michigan suggested, but it would require far more farmworkers than we have today. With unemployment approaching double digits — and things especially grim in impoverished rural areas that have seen populations collapse over the past several decades — that's hardly a bad thing. Work in a CAFO is monotonous and soul-killing, while too many ordinary farmers struggle to make ends meet even as the rest of us pay less for food. Farmers aren't the enemy — and they deserve real help. We've transformed the essential human profession — growing food — into an industry like any other. "We're hurting for job creation, and industrial food has pushed people off the farm," says Hahn Niman. "We need to make farming real employment, because if you do it right, it's enjoyable work."

One model for how the new paradigm could work is Niman Ranch, a larger operation that Bill Niman founded in the 1990s, before he left in 2007. (By his own admission, he's a better farmer than he is a businessman.) The company has knitted together hundreds of small-scale farmers into a network that sells all-natural pork, beef and lamb to retailers and restaurants. In doing so, it leverages economies of scale while letting the farmers take proper care of their land and animals. "We like to think of ourselves as a force for a local-farming community, not as a large corporation," says Jeff Swain, Niman Ranch's CEO.

Other examples include the Mexican-fast-food chain Chipotle, which now sources its pork from Niman Ranch and gets its other meats and much of its beans from natural and organic sources. It's part of a commitment that Chipotle founder Steve Ells made years ago, not just because sustainable ingredients were better for the planet but because they tasted better too — a philosophy he calls Food with Integrity. It's not cheap for Chipotle — food makes up more than 32% of its costs, the highest in the fast-food industry. But to Ells, the taste more than compensates, and Chipotle's higher prices haven't stopped the company's rapid growth, from 16 stores in 1998 to over 900 today. "We put a lot of energy into finding farmers who are committed to raising better food," says Ells.

Bon Appétit Management Company, a caterer based in Palo Alto, Calif., takes that commitment even further. The company sources as much of its produce as possible from within 150 miles of its kitchens and gets its meat from farmers who eschew antibiotics. Bon Appétit also tries to influence its customers' habits by nudging them toward greener choices. That includes campaigns to reduce food waste, in part by encouraging servers at its kitchens to offer smaller, more manageable portions. (The USDA estimates that Americans throw out 14% of the food we buy, which means that much of our record-breaking harvests ends up in the garbage.) And Bon Appétit supports a low-carbon diet, one that uses less meat and dairy, since both have a greater carbon footprint than fruit, vegetables and grain. The success of the overall operation demonstrates that sustainable food can work at an institutional scale bigger than an élite restaurant, a small market or a gourmet's kitchen — provided customers support it. "Ultimately it's going to be consumer demand that will cause change, not Washington," says Fedele Bauccio, Bon Appétit's co-founder.

How willing are consumers to rethink the way they shop for — and eat — food? For most people, price will remain the biggest obstacle. Organic food continues to cost on average several times more than its conventional counterparts, and no one goes to farmers' markets for bargains. But not all costs can be measured by a price tag. Once you factor in crop subsidies, ecological damage and what we pay in health-care bills after our fatty, sugary diet makes us sick, conventionally produced food looks a lot pricier.

What we really need to do is something Americans have never done well, and that's to quit thinking big. We already eat four times as much meat and dairy as the rest of the world, and there's not a nutritionist on the planet who would argue that 24‑oz. steaks and mounds of buttery mashed potatoes are what any person needs to stay alive. "The idea is that healthy and good-tasting food should be available to everyone," says Hahn Niman. "The food system should be geared toward that."

Whether that happens will ultimately come down to all of us, since we have the chance to choose better food three times a day (or more often, if we're particularly hungry). It's true that most of us would prefer not to think too much about where our food comes from or what it's doing to the planet — after all, as Chipotle's Ells points out, eating is not exactly a "heady intellectual event." But if there's one difference between industrial agriculture and the emerging alternative, it's that very thing: consciousness. Niman takes care with each of his cattle, just as an organic farmer takes care of his produce and smart shoppers take care with what they put in their shopping cart and on the family dinner table. The industrial food system fills us up but leaves us empty — it's based on selective forgetting. But what we eat — how it's raised and how it gets to us — has consequences that can't be ignored any longer.

— With reporting by Rebecca Kaplan / New York

The original version of this article mistakenly referred to the Bon Appétit Management Company as the Bon Appétit Food Management Company

The Tale of Two Cattle
How did your hamburger get to your plate — and what did it eat along the way? The journey of beef illustrates the great American food chain

ORGANIC (1% of all cattle)
This is the way all beef used to be raised — and how some people still imagine it is. Bill Niman tends a small herd with one of the lightest hands in the business and produces what Bay Area chefs swear is unparalleled beef

Diet: Grass
Niman's cows eat only grass, along with a smattering of hay. That's the normal diet for cattle. Their rumen, a digestive organ, can break down grasses we'd find inedible

Supplements: None
Niman gives no supplements whatsoever to his cattle — no drugs, no hormones, no additives. That's not ironclad for organic beef — some companies might use antimicrobials — but generally the animals are supplement-free

Environmental Impact: Living with the Land
To prevent his ranch from becoming overgrazed, Niman shifts his cattle around the land, ensuring that the grass has time to recover between feedings. The result is a surprisingly low-impact hamburger, since grass doesn't need chemical fertilizer to grow and its presence helps prevent soil erosion. There's no need to clean up manure — with Niman's low cattle density, the waste just fertilizes the land

Human Impact: The Omega Effect
Beef has a bad rep among nutritionists, but that might be partly unfair for grass-fed steaks. According to research from the University of California, grass-fed beef is higher in beta-carotene, vitamin E and omega-3 fatty acids than conventional beef

CONVENTIONAL (99% of all cattle)
The vast majority of all American cattle start off on open ranges, but that's where the similarity to their organic cousins ends. They're shifted after a few months to the tight quarters of an industrial feedlot, to be fattened up as fast as possible

Diet: Grass and corn
Conventional cattle feed off grass pasture for the first several months, but at the feedlot, they're switched to a heavily corn-based diet, which makes them gain weight faster but also makes them get sick more easily

Supplements: Chemicals
In part to help them survive the crowded conditions of feedlots, where infections can spread fast, conventional cattle are given antibiotics in their feed, and sometimes growth hormones, bloods and fats

Environmental Impact: Waste
A 1,000-head feedlot produces up to 280 tons of manure a week, and the smell can be powerful. All that feed corn requires millions of tons of fertilizer and, ultimately, a lot of petroleum

Human Impact: Fat Attack
Feeding corn to cattle for the last several months of their lives doesn't just get them fatter faster; it also changes the quality of the beef. Corn helps produce that marbled taste many of us love, but it can result in beef that is higher in fat — helping to fuel the obesity epidemic

Camarillo-area greenhouses produce 21st century crops

High-tech facilities hoard water, generate electricity and produce 20 times more tomatoes per acre than conventional farms. But the seed money needed is also far greater.

By Jerry Hirsch, Los Angeles Times

May 14, 2009

On a coastal plain near Camarillo not far from a U.S. Navy base and an outlet mall, the future of California farming is taking shape.

Rising out of verdant acres of strawberries and artichokes between Highway 101 and the Pacific Ocean in Ventura County are two mammoth, high-tech greenhouses.

Climate change is a serious threat to California's $36-billion agricultural economy. The farming company behind this $50-million complex sees it as insurance against perpetual drought, volatile fossil fuel prices and resilient pests.

The facility generates its own renewable power. It hoards rainwater. It hosts its own bumblebees for pollination. And it requires a fraction of the chemicals used in neighboring fields to coax plants to produce like champions.

This fledgling movement to grow food crops in closed, sustainable environments could become as revolutionary to farming in the 21st century as California's development of massive farms was in the 20th, agriculture experts say.

"We are doing all of this not only because it will be good for our business but because it will be good for everyone else," said Casey Houweling, president of Houweling Nurseries, the Canadian farming company that is cultivating tomatoes at the facility, which will be fully operational in June.

The son of a Dutch immigrant farmer, the 51-year-old Houweling has helped build his family's agricultural business into one of the largest greenhouse-based growers in North America. But the California facility is no ordinary hothouse.

On a recent afternoon, he was eager to show visitors clusters of plump, sweet tomatoes hanging overhead from vines that reach high into the rafters. This arrangement allows the farm's 450 permanent employees to climb ladders to pick the fruit instead of stooping. The plants, which are fed individually through tubing that looks like intravenous hospital equipment, produce 20 times more fruit per acre than in conventional field production.

Virtually nothing is wasted in this ecosystem. Workers have dug a four-acre pond to store rainwater and runoff. This water, along with condensation, is collected, filtered and recirculated back to each of the 20-acre greenhouses. That has cut water use to less than one-fifth of that required in conventional field cultivation. Fertilizer use has been reduced by half. There are no herbicides and almost no pesticides, and there is no dust.

Five-acres of photovoltaic solar cells supply much of the electricity to run pumps and climate controls. Thermal systems collect solar heat and warehouse refrigeration exhaust to warm the greenhouses on cool evenings. Together, the two systems generate 2.1 megawatts of electricity, enough to power 1,500 homes.

"We believe this is the first greenhouse in the world that is energy neutral," Houweling said.

Houweling envisions a day when greenhouses dot California's lush coastal plains, taking advantage of the abundant sunlight to grow thirsty crops such as lettuce and strawberries, using renewable energy to reduce their burden on the environment.

Until recently, that was a pipe dream. The cost of heating and cooling these structures was prohibitive for all but the highest-value specialty produce. The nation grows less than $1 billion worth of greenhouse fruits and vegetables annually.

But the rising expense of traditional farming is fast narrowing the cost gap. California farmers are coping with years of drought. They're also grappling with land degradation, an unstable migrant workforce and rising shipping costs.

"We are closer to parity than we have ever been," said Gene Giacomelli, a professor of agriculture and biosystems engineering at the University of Arizona in Tucson.

Houweling's greenhouses are at the leading edge of the type of facilities farmers will increasingly rely on for production, Giacomelli said.

Designed by Kubo Greenhouse Projects, a Dutch company, the temperature- and humidity-controlled glass-sheeted farm is expected to produce 482 tons of tomatoes per acre, 15% more than Houweling's previous generation of greenhouses. The plants live far longer than field crops and are replaced every six months.

Still, a shift to more greenhouse farming will be slow.

"Houweling is doing the demonstration," Giacomelli said. "He is going to have to prove to himself and his banker that this is the way to go."

Although they need just a fraction of the land taken up by conventional farming, greenhouses require far greater capital investment. The expansion to Houweling's Camarillo farm -- which includes the two greenhouses; the climate, energy and environmental technology; and a new packing plant -- amounts to about $1 million an acre, not including the land.

Houweling said he expected the investment to take as long as 10 years to pay off, depending on the price of tomatoes. More tomato-linked salmonella scares and bad weather during the growing season in Florida would shorten the pay-back period.

Other entrepreneurs are likely to launch into hothouses on a smaller scale, building facilities in urban areas near New York and Chicago to supply produce to local farmers markets, Giacomelli said.

These farms will have to be energy efficient -- tapped into renewable or co-generation energy -- to deal with the colder fall and spring climates, and they won't be year-round. There isn't enough sunlight from November through February to grow hothouse crops in big enough volume to pay for the heating bill.

Yet such small greenhouse farms, and the potential for even smaller, urban rooftop hothouses, will help provide for locally grown produce outside the traditional growing season in these regions, Giacomelli said.

Even so, California will probably become the center of greenhouse agriculture. With more than 300 days of sunshine annually, the climate provides an ideal year-round growing opportunity and keeps volumes high. Mild weather limits heating and cooling expenses. California's existing farm infrastructure also gives it an advantage over other locales.

"California always does agriculture big," said Giacomelli, "and it will do this big too."

jerry.hirsch@latimes.com

Saturday, August 22, 2009

Who needs gasoline if you have old beer?

ENERGY

The MicroFueler makes ethanol out of organic waste in minutes. It can be installed at individual homes, and companies are eager to supply owners with garbage.


By Susan Carpenter, Los Angeles Times

August 22, 2009

It sounds too good to be true: A residential system that allows people to make fuel from old beer, leftover wine and other waste products and use it to run their vehicles.

That's what inventors of the E-Fuel MicroFueler claim, and there's support for the idea in government, industry and pop culture. MicroFueler buyers are eligible for a $5,000 tax credit. Former L.A. Laker Shaquille O'Neal is an investor in the system's distributor.

The $10,000 E-Fuel MicroFueler consists of a 250-gallon tank for organic feedstock, such as waste wine and beer, and a still that converts it to pure ethanol, or E-Fuel. The still doubles as a fuel pump, which works similarly to those at gas stations. The only waste product is distilled water.

"If we give everybody the ability to make their own fuel, you break the oil infrastructure," said MicroFueler inventor Tom Quinn, a Silicon Valley entrepreneur who also developed the motion-control system for the Nintendo Wii gaming system, a version of which is used in his new micro-refinery.

"Three years ago, I looked at where the world was going, and energy caught my eye," said Quinn, chief executive of E-Fuel Corp. in Los Gatos. "As a world, we had no replacement fuel for gasoline, and that led me to alternative fuels such as ethanol."

The problem with ethanol, Quinn said, was energy inefficiency -- not only in the carbon cost of growing, harvesting and transporting the corn that was used to make it, but also in the distillation process that turned it into usable fuel. Many environmentalists are critical of corn-based ethanol, saying it is an inefficient fuel that uses valuable cropland and increases food prices.

"In the U.S. alone, more than 100 billion gallons of organic fuel is thrown out," said Quinn, who reached out to ethanol scientist Floyd Butterfield to see if they could collaborate on a system that could make ethanol in a manner that was cost effective and better for the environment.

The idea was to use organic waste rather than corn to make a product known as cellulosic ethanol.

Although Quinn's MicroFueler is most effective with wastes that are high in alcohol, ethanol "can be made out of any waste -- lawn clippings, dairy products, old chemicals, cardboard, paper, bruised and discarded apples from the grocery store. It can be fermented and turned into fuel in minutes," Quinn said.

So far, only one MicroFueler is up and running. It was installed in late June at the Pacific Palisades home of Chris Ursitti, CEO of GreenHouse International Inc., the San Diego firm that is distributing the units and supplying feedstock to those who install MicroFuelers at their homes.

"You just open up the hatch and pour in some waste and it turns it into fuel for the car," said Ursitti, who's been using homemade ethanol to run his flex-fuel-converted Lexus hybrid SUV.

GreenHouse has contracts with Karl Strauss Brewing Co., Gordon Biersch Brewing Co. and Sunny Delight Beverages Co. to convert 29,000 tons of their liquid waste using MicroFuelers.

Though Ursitti is the only one now using the system, the plan is for a tanker truck to pick up the companies' waste and deliver it to home-based MicroFuelers, which convert it to ethanol on site. MicroFueler owners are charged $2 a gallon once they pump out the fuel.

"What they need, we have. What we need, they have," said Karl Strauss CEO Chris Cramer, referring to his San Diego company's symbiotic relationship with GreenHouse, for which no money is changing hands.

Before entering the feedstock pilot program with GreenHouse, Karl Strauss took care of all its beer-brewing waste products by paying outside companies to destroy beer that had passed its freshness date and farmers who fed the spent brewing grains to their pigs. Now GreenHouse is using expired beer.

"Because we're a fairly large craft brewer, there's a lot of yeast, a lot of beer going around," Cramer said. "Any drops of beer that don't go into a bottle, we'd like to make ethanol and fuel vehicles."

Converting expired beer and other liquid wastes into cellulosic ethanol takes minutes and uses three kilowatt-hours of electricity to produce one gallon of fuel.

In addition to powering vehicles, the fuel could run a "gridbuster," or home generator, which produces 23 kilowatt-hours of electricity per gallon, GreenHouse said.

Factoring in the $5,000 federal tax credit, an annual household fuel consumption of 2,080 gallons and a $2 charge a gallon, GreenHouse estimates the average consumer payback time is about two years.

Ethanol has less fuel value than gasoline, meaning a car will travel fewer miles on a gallon of ethanol than on a gallon of gasoline. But it also creates 38% less carbon dioxide than gasoline when burned, according to Quinn.

The U.S. Environmental Protection Agency "has not been called upon to analyze the environmental impacts of [organic ethanol] in comparison to gasoline," EPA spokeswoman Cathy Milbourn said. However, she said, "using waste products derived from renewable sources . . . would likely lead to an overall smaller carbon footprint in comparison to a food-based feedstock" such as corn.

It's legal to make up to 10,000 gallons a year of alcohol fuel, such as ethanol, on one's own property as long as it isn't sold to others. An alcohol fuel producer's permit from the U.S. Alcohol and Tobacco Tax and Trade Bureau is required.

susan.carpenter@latimes.com

Thursday, August 20, 2009

An apple a day keeps extinction away for rare fruit

Group seeks to preserve endangered Sebastopol Gravensteins by encouraging people to eat them.

By Margot Roosevelt, Los Angeles Times

August 20, 2009

Wolves, bears, frogs and other wild things aren't the only sorts of endangered species. Rare breeds of domestic animals such as Red Wattle pigs and Narragansett turkeys are also threatened with extinction. So are thousands of varieties of vegetables and fruits.

Just as wild plants and animals have their environmental champions, so foodies are seeking to preserve the biodiversity of cultivated species and rescue rare delicacies such as California's Sebastopol Gravenstein apple. The big difference? With endangered foods, you save them by eating them.

A century ago, 1,600 varieties of apples were cultivated in the U.S. Today, grocery shoppers are lucky to find 11 in their local stores. Slow Food Russian River, a Northern California chapter of Slow Food USA, has launched a campaign to promote the crunchy Gravenstein, brought to California about 1790 by Russian settlers. In the early 1900s, thousands of Gravenstein orchards made Sonoma County the world capital of that tasty variety. Streets and schools were named after the apple and annual Gravenstein festivals celebrated its delights in pies, juice, vinegar, sauces and brandy.

Today fewer than 10 Sonoma farmers make a living selling apples, according to the group. "It is part of our local agricultural heritage, and yet it is disappearing so fast that it could become commercially extinct."

Six years ago, the Russian River activists applied to the Slow Food Foundation for Biodiversity, which named the Sebastopol Gravenstein one of six "Presidia" projects in the U.S. (Presidia are groups that promote regional foods).

Now the local Apple Corps, a volunteer organization, is working with farmers markets and chefs to develop "high-value marketing channels," publishing on its Slow Food website the photos and phone numbers of Gravenstein growers and links to more than 60 Northern California eateries featuring "Gravs" on their August menus from Berkeley to Yountville.

But if scientists' predictions of the effects of global warming on California agriculture are correct, food preservationists have their work cut out for them.

According to a UC Davis study last month, large swaths of the Central Valley, the nation's most productive fruit and nut-growing region, will be unsuitable for growing apples, peaches, apricots, plums, cherries, walnuts and pistachios by the end of the century.

margot.roosevelt@latimes.com

Biofuel Bet Aims to Harvest Fish That Feed on Algae

AUGUST 18, 2009

Start-Up Wants to Render Oil by Targeting 'Dead Zones' in the Gulf of Mexico; 'The Sea Equivalent of Traveling Goats'

By RUSSELL GOLD, Wall Street Journal

Each spring, fertilizer runoff from the Mississippi River floods into the Gulf of Mexico, causing a massive algae bloom that leads to a giant oxygen-deprived "dead zone" where fish can't survive.

Now, this annual problem is getting new attention, not from marine scientists but from entrepreneurs looking for a new domestic source of fuel. And one start-up sees fish themselves being part of the process.

The algae blooms are spawned each year as the farmland runoff from as far away as Montana flows into rivers, eventually reaching the Mississippi and flowing into Louisiana bayous and out into the Gulf of Mexico. These nutrients are a buffet for the floating algae, or phytoplankton, which are simple sea organisms that eat and reproduce quickly. This algae bloom eventually sinks and feeds bacteria, which undergo their own population bonanza, and the bacteria suck up so much oxygen that fish and plants either move away or perish.

These so-called hypoxic areas exist around the world, and there were as many as 200 in North America in the spring, says Robert J. Diaz, a professor of marine science at the College of William & Mary in Virginia. The Gulf of Mexico dead zone is the second largest in the world, after one in the Baltic Sea.

Scientists have been studying dead zones for decades. The Louisiana seafood industry worries that dead zones threaten the ecosystems that support the state's $1 billion shrimp industry as well as other fisheries. Environmental groups are concerned that the runoff from agricultural fertilizer is pushing a natural ecosystem toward collapse.

Turning algae into a bio-based oil to run in conventional refineries alongside crude has been a long-held dream of biofuels entrepreneurs. Exxon Mobil Corp. last month announced a partnership with Synthetic Genomics Inc., a biotech firm owned by genomics scientist J. Craig Venter, to spend as much as $600 million working on developing algae biofuels. Greener Dawn Research estimates that privately held start-ups Sapphire Energy and Solazyme Inc. have raised more than $75 million for their own algae-to-fuel effort.

Thus far, both of those projects plan to raise their algae stocks in controlled facilities onshore.

LiveFuels Inc., a Silicon Valley start-up, has a different idea. Rather than growing algae in onshore facilities, where the cost of circulating the water can be high, LiveFuels wants to use the algae in the dead zones. But instead of harvesting it directly, it wants to go a step up the food chain, using algae to feed fish that could be processed for oil.

"It is too expensive for humans to grow algae, harvest it and get the water out and then convert it into a petroleum-like substitute," said LiveFuels Chief Executive Lissa Morgenthaler-Jones. It is easier and cheaper to harvest algae's oil the way Mother Nature does it -- "which is to use fish," she said.

The fish would gobble up the algae and then be harvested, cooked and pressed to extract fish oil -- a method already used to produce omega-3 fatty acid dietary supplements.

LiveFuels, San Carlos, Calif., is testing out carp, tilapia and members of the sardine family at a fish farm in Rio Hondo, Texas, near the Mexican border. Once it figures out a good fish mix, LiveFuels wants to release them in Louisiana bays -- more than 25,000 pounds of fish per acre -- to feast on the algae blooms. "This is the sea equivalent of traveling goats: you have algae, we'll bring the fish," she says, referring to companies that rent out goats to eat up grasses on California hillsides to reduce the danger from wildfires. They would truck in the fish and release them into a cordoned-off area. Cages would be used to keep carnivorous fish out.

The company envisions building caged fish farms in parts of the algae blooms in Louisiana bayous and offshore in the Gulf. The algae would provide a free source of food to raise the fish, and natural tidal flows would churn the algae to keep fresh nutrient-rich water flowing through.

The idea isn't meeting universal praise. "Our preference is not to wait until the Gulf of Mexico is a giant dead zone and then have someone go out and collect the algae," says Ed Hopkins, director of the Sierra Club's environmental-quality program. He favors reducing fertilizer runoff upstream to cut off the nutrients that feed the algae blooms.

LiveFuels also faces a more practical concern. Algae blooms are seasonal and move around from year to year, so Livefuels might have to design mobile fish farms to capture the moveable feasts. The National Oceanic and Atmospheric Administration recently said the dead zone this summer was the fourth smallest in the 25 years they have been measured, though it was still about 3,000 square miles, larger than Delaware.

Nancy Rabalais, executive director of the Louisiana Universities Marine Consortium, is doubtful of the plan. "There are several groups looking at phytoplankton as a biomass. But my sense is there is not enough on a continual basis to make it economically feasible," she said.

David T. Kingsbury, chairman of LiveFuels' scientific advisory board and a former assistant director of the National Science Foundation, said he was skeptical at first, too, "but I've come around. It hasn't really been fully tested yet, but it seems like a reasonable idea," he said.

Write to Russell Gold at russell.gold@wsj.com

Thursday, August 13, 2009

Cap-and-Trade's Unlikely Critics: Its Creators

AUGUST 13, 2009

Economists Behind Original Concept Question the System's Large-Scale Usefulness, and Recommend Emissions Taxes Instead

By JON HILSENRATH, Wall Street Journal

In the 1960s, a University of Wisconsin graduate student named Thomas Crocker came up with a novel solution for environmental problems: cap emissions of pollutants and then let firms trade permits that allow them to pollute within those limits.

Now legislation using cap-and-trade to limit greenhouse gases is working its way through Congress and could become the law of the land. But Mr. Crocker and other pioneers of the concept are doubtful about its chances of success. They aren't abandoning efforts to curb emissions. But they are tiptoeing away from an idea they devised decades ago, doubting it can work on the grand scale now envisioned.

"I'm skeptical that cap-and-trade is the most effective way to go about regulating carbon," says Mr. Crocker, 73 years old, a retired economist in Centennial, Wyo. He says he prefers an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem.

The House has passed cap-and-trade legislation. The Senate could take up a measure in September. But Republicans strongly oppose the idea -- arguing that it is a tax that will hurt the economy -- and Democrats are struggling to come up with an approach that apportions the inevitable cost of a cap-and-trade system among different interests, from consumers to utilities to coal plants.

Mr. Crocker, who went on to become a professor at the University of Wyoming, is one of two economists who dreamed up cap-and-trade in the 1960s. The other, John Dales, who died in 2007, was also a skeptic of using the idea to tame global warning.

Mr. Crocker sees two modern-day problems in using a cap-and-trade system to address the global greenhouse-gas issue. The first is that carbon emissions are a global problem with myriad sources. Cap-and-trade, he says, is better suited for discrete, local pollution problems. "It is not clear to me how you would enforce a permit system internationally," he says. "There are no institutions right now that have that power."

Europe has embraced cap-and-trade rules. Emissions initially rose there because industries were given more permits than they needed, and regulators have since tightened the caps. Meanwhile China, India and other developing markets are reluctant to go along, fearing limits would curb their growth. If they don't participate, there is little assurance that global carbon emissions will slow much even if the U.S. goes forward with its own plan. And even if everyone signs up, Mr. Crocker says, it isn't clear the limits will be properly enforced across nations and industries.

The other problem, Mr. Crocker says, is that quantifying the economic damage of climate change -- from floods to failing crops -- is fraught with uncertainty. One estimate puts it at anywhere between 5% and 20% of global gross domestic product. Without knowing how costly climate change is, nobody knows how tight a grip to put on emissions.

In this case, he says Washington needs to come up with an approach that will be flexible and easy to adjust over a long stretch of time as more becomes known about damages from greenhouse-gas emissions. Mr. Crocker says cap-and-trade is better suited for problems where the damages are clear -- like acid rain in the 1990s -- and a hard limit is needed quickly.

"Once a cap is in place," he warns, "it is very difficult to adjust." For example, buyers of emissions permits would see their value reduced if the government decided in the future to loosen the caps.

Joseph Aldy, a White House adviser on the environment, calls the argument a "straw man," saying a market-based cap is being designed with built-in flexibility. For example, a price ceiling on carbon allowances could prevent the program from becoming too big a burden on households and businesses and a floor would prevent a big loss in the value of permits. And unlike a tax, he says, a cap ensures carbon reduction.

Pollution has been a puzzle for economists for decades. In the early 1900s, a British economist named Arthur Pigou proposed taxes on polluters. Ronald Coase, a University of Chicago economist, won a Nobel Prize for his 1960 book, "The Problem of Social Cost," which showed how market economics could address pollution problems.

In 1966, Mr. Crocker, still struggling to finish his thesis at the University of Wisconsin at Milwaukee, sketched out the cap-and-trade idea to deal with air pollution produced by fertilizer plants in Florida. Mr. Crocker first pitched the idea of trading at a conference in Washington. He had been asked to attend as a stand-in for a professor who couldn't go and present data on the Florida plants. He didn't have all the data yet and came up with the theory instead.

Working separately, Mr. Dales in 1968 published a book called, "Pollution, Property and Prices," which used the same approach for farmers who were polluting Canadian lakes and streams.

Their logic went like this: When governments capped smog emissions from power plants or the runoff of pesticides by farmers into local streams, it was indirectly putting a value on these emissions. Some farmers and some power plants could reduce these emissions more efficiently than others, and some placed a higher value on them than others. By setting caps on pollution but then allowing the polluters to trade these rights, the economists theorized, the polluters themselves would figure out the cheapest way to meet new targets.

Another economist, David Montgomery, advanced their ideas in the 1970s, converting their theories into the complex mathematical formulas to demonstrate that they weren't merely an idea but were also economically feasible. Mr. Montgomery, too, is a skeptic of cap-and-trade for greenhouse gases. He prefers an outright tax.

"You get huge swings in carbon prices with a cap, which creates more volatility and uncertainty for business," he says.

Cap-and-trade got a big boost in 1990, when President George H.W. Bush signed amendments to the Clean Air Act that imposed new limits on emissions of sulfur dioxide, which produces acid rain. Economists said the move let producers save billions of dollars and still hit their targets.

Still, Messrs. Dales and Crocker never got much personal mileage out of the idea. Mr. Crocker says he had such a hard time getting funding to further his research on the subject that he moved on to other matters. So far, he has stayed on the sidelines in the debate about cap-and-trade.

Write to Jon Hilsenrath at jon.hilsenrath@wsj.com

Food Firms Fret Over Potential Impact of Climate Bill

AUGUST 13, 2009

Coalition, Including Agricultural Giants, Plans to Draw Attention to Concerns That Legislation Could Lead to Higher Food Prices

By LAUREN ETTER, Wall Street Journal

Some of the nation's biggest food and agriculture companies are planning to release a flurry of studies in coming weeks that scrutinize the potential impact of climate-change legislation, warning that it could lead to higher food prices.

A group of agriculture giants including Cargill Inc., along with meat company Tyson Foods Inc. and food maker General Mills Inc., is concerned the companies might bear a disproportionate share of the costs of such legislation, according to a memo reviewed by The Wall Street Journal.

The group also is worried that a House bill passed in July doesn't provide sufficient incentives for food and agricultural companies to receive and generate carbon credits to offset their carbon emissions.

The meat industry is anxious that the legislation might put restrictions on the ability of livestock operations to generate carbon credits that could offset their greenhouse gas emissions. Livestock and food companies emit greenhouse gases in a number of ways, including using trucks to transport food and slaughterhouses that run on natural gas.

Under the proposed climate-change legislation, a carbon offset, or credit, can be generated when a company reduces the amount of greenhouse gas emitted into the atmosphere through a variety of approved projects. Livestock facilities, for example, would like to generate offsets by trapping methane from manure lagoons, among other things.

The resulting offsets can then be sold to other polluters or used by the producer to reduce its overall emission totals. Certain companies would have to pay penalties if they emit more than allowed without offsets.

Other members of the food coalition include the Grocery Manufacturers Association, the National Turkey Federation, the American Meat Institute and the American Frozen Food Institute.

The coalition, which formed informally about two months ago, is becoming more active after concluding that member companies didn't win enough concessions in the House climate legislation, industry lobbyists said. The Senate is expected to take up its own climate bill when senators return from recess next month.

The farm lobby won several favorable provisions in the House bill, including an exemption from having to cap many carbon emissions from farms. The House bill also sets up a number of programs that will allow farmers to generate carbon credits that will offset their emissions.

But the big food and agriculture companies feel they came up short. In a letter sent last month to Sens. Barbara Boxer, the California Democrat, and Republican James Inhofe of Oklahoma, the coalition said the House bill "will increase food and feed prices and reduce the international competitiveness of our businesses."

The letter said Congress "must take extreme care to avoid adverse impacts on food security, prices, safety, and accessibility to necessary consumer products." The letter also criticized the House bill for failing to provide transitional assistance to "low-income households struggling with rising food prices."

When the group's studies are released, possibly by the end of August, they are likely to reignite tensions between food and ethanol producers that have raged since 2007 when Congress passed energy legislation that gave a big boost to the corn-ethanol industry.

The food industry has complained that the energy bill pushed up prices for corn and other key food ingredients that resulted in higher consumer prices as the ethanol industry siphoned more corn to make ethanol. The ethanol industry accused the food companies of using the argument as a smoke screen to raise prices.

Write to Lauren Etter at lauren.etter@wsj.com

Tuesday, August 11, 2009

Argentina's cattle crisis

A spike in prices is threatening the world's most beef-dependent economy.

By Telis Demos, writer-reporter, Fortune Magazine

August 11, 2009: 10:52 AM ET

(Fortune Magazine) -- Around these parts, Americans anxiously watch our favorite summer economic indicator -- the price of gasoline -- to get a sense of where the economy may be headed. But in Argentina, locals are watching their favorite winter barometer: the price of beef.

Argentineans consume more beef than anyone else in the world, about 160 pounds per person annually, and more than twice as much as Americans. Beef accounts for 5% of their consumer price index, and it is Argentina's third biggest export. (Until Mark Sanford's recent Argentine escapade, beef was what most Americans associated with the country).

So this year, as local beef prices rise -- over 20% so far in 2009 -- Argentina has been worried. So worried, in fact, that one local politician suggested that some of the asado -- Argentina's thinly sliced grilled-beef specialty -- served at parties celebrating the country's bicentennial next year may be imported from their tiny neighbor Uruguay.

"Nobody can believe that they may start importing beef," says Bernardo Mariano, a financial analyst who splits his time between New York and Buenos Aires. "People are using it as a measure of how deeply troubled the country is."

The price hike is due to scarcity. Not only have Argentina's gaucho ranchers been suffering through a terrible drought, which dried up the grass fields where cattle graze and eat, but the global recession is increasing demand for corn, wheat, and soybeans as consumers turn away from pricey protein. As a result, many of Argentina's farmers are converting their fields from grazing to grains, now the country's top export.

Argentina's so-called "beef crisis" has been ongoing for a few years. Thousands have been laid off from beef-processing plants after problems with disease-control led many countries -- including the U.S. -- to limit their Argentine imports to processed rather than fresh beef in the early 2000s. Brazilian competitors have bought up weakened local producers.

Argentina's populist-minded government tried to tame local beef prices by banning exports in 2006 to increase the supply at home. But ranchers were furious; they rioted and blocked roads to the cities, leading prices to shoot up fourfold. Some ranchers decamped to the more liberal pampas of Uruguay, now a top-seven beef exporter. (Uruguay even stole Argentina's record for the largest barbecue ever -- 16 tons.)

Pablo Liberato, a native Argentinean who owns a U.S. beef distribution company called Gaucho Ranch in Miami, says that his prior businesses of importing Argentine beef flopped because supply and prices were so sketchy. He's since switched to Uruguayan beef, with great success. "It's a little awkward for me to say," he says, "but in Uruguay, the beef is just as good, and everything works much better, commercially speaking."

Besides wounded national pride, the bigger-picture problem is that the lack of export income from beef, along with the drop in grain prices and an existing budget crisis, could force Argentina to default, says Morgan Stanley economist Daniel Volberg. "It's bad enough you have started to a see a shift in people's tastes," he says.

In fact, some Argentine farmers have finally started to switch to the beef equivalent of a hybrid-car: mechanized grain feedlots and antibiotics for their cattle. It's antithetical to the grass-fed, chemical-free ideal that made their meat so special, sure. But it might be better than a growing dependence on foreign beef -- and another financial crisis.