NeCGA President Uhrmacher Meets with Governor, Director
July 28, 2008
Governor Heineman, Director Ibach — The Nebraska Corn Growers Association appreciates your efforts in arranging this meeting to identify issues and discuses ideas. We believe that everyone here today is concerned for the future of our state’s agriculture industry. Depending on your perspective, we may look back some day and think these were the proverbial best of times and worst of times. Never in my mind a year and half ago when I became president of the Corn Growers did I think I’d have to defend corn because the price is too high.
In the past six months we have been engaged in a debate regarding record prices of energy and commodities and their effect on our industry and the world’s consumer. It’s human nature to try and find a simple answer to a very complex problem, a problem has a broad range of variables that we have little or no control over. Energy prices, weather, economic growth, currency valuations and government policies around the world are some of the factors creating the environment in which we are operating today.
Over the past year we have been overwhelmed with study after study attempting to identify, justify and provide solutions to the current environment. One of the most recent reports was conducted by the Farm Foundation and authored by economists at Purdue University. This report is a literary review and examines more than 25 studies regarding food, fuel and agriculture production. I would encourage everyone to read this report as it provides a view from a long-term perspective and identifies positives and negatives that we are currently facing, as well as some forward thinking.
These economists broke down three broad areas that are responsible for driving world food prices:
- Global changes in production and consumption of commodities,
- The depreciation of the dollar, and
- Growth in production of biofuels.
These broad areas each have a wide range of factors at play, and they create the complex scenario we are addressing here today. The report’s authors make no attempt to calculate a value to any of the disparate causes, and believe due to the interplay of factors that it is impossible to accurately do so.
We are all aware of the increase in world consumption of the products we produce, and we recognize that energy plays an important role in getting those products to market, wherever that market may be. All of us have also worked to expand the markets for our products around the world. In fact, thanks to economic growth in developing counties, a weak dollar and work by our organizations, we are seeing record global demand for many of Nebraska agriculture products.
The growth in biofuels has had some effect on the corn market, although minor. This impact is not being driven by the Renewable Fuels Standard, blender's credit or import tariff, however. Instead, the impact comes from the high demand for ethanol due to record oil prices. The RFS and other incentives provide a platform in which a developing industry is able to compete in the liquid fuel market place. If oil prices were low, the RFS may have played a bigger role, but it’s $140.00 crude oil and consumer demands for alternatives that has been one of the accelerating factors over the past 18 months.
The world demand for oil and other forms of energy have an affect on every consumer and agriculture and food producer in this country. Price increases at the gas station were just the first sign of what else was coming. Higher energy costs then hit the food market, and are now becoming apparent to consumers as prices rise for other products and services in almost every sector of our economy.
