9 September 2004

El Salvador: Cargill’s ethanol plans upset farmers

In what could impact the future of Nebraska’s ethanol development, the National Corn Growers Association (NCGA) Tuesday expressed disappointment in Cargill’s decision to proceed with investment plans for an ethanol dehydration plant in El Salvador. In a letter sent to Cargill President and Chief Operating Officer Greg Page, NCGA officials said the decision undermines the relationship Cargill has established with U.S. corn growers and circumvents the intended purpose of the Caribbean Basin Initiative (CBI).

“NCGA believes Cargill’s decision is not in the best interest of the company or the ethanol industry in the United States,” NCGA President Dee Vaughan said in the letter. “We reiterate our desire for Cargill to look closer to home when increasing its investment in the ethanol industry.” As opposition mounts to Cargill’s plans, the company announced that it’s moving forward with plans to proceed with the dehydration plant. NCGA and other groups say Cargill is exploiting a loophole in the CBI legislation that was designed to promote economic development in Caribbean Basin trading partners.

The CBI allows an amount of ethanol equivalent to 7 percent of total U.S. production to come into the United States duty-free. Cargill’s El Salvador plant would take the water out of Brazilian ethanol, which would then be shipped to the United States duty-free. “The Caribbean Basin Initiative should benefit farmers in that region and spur economic development in the basin,” the letter states. “It should not be used as a method to trans-ship Brazilian ethanol.”

On Friday, Brian Jennings, executive vice president of the American Ethanol Coalition, said increasing the number of foreign sources of ethanol into the United States could hurt the future of Nebraska’s ethanol industry, which now produces more than 500 million of ethanol annually. Jennings was in Omaha Friday speaking at a meeting of the Nebraska Ethanol Board. “This is still a relatively young industry and the room for growth in Nebraska and other states is phenomenal,” Jennings said. “We can produce a lot more ethanol in this country than we do now. But one thing that would undermine this industry is if we transshipped or dumped ethanol from Brazil into the United States.”

In response to Cargill’s actions, Senate Finance Committee Chairman Chuck Grassley, R-Iowa, has introduced legislation that would prevent an increasing amount of imported ethanol from bypassing the standard import tariff. In order to promote ethanol use, petroleum companies in the United States currently receive a 5.2 cents per gallon federal excise tax exemption on a gallon of gasoline blended with 10 percent ethanol. An offsetting tariff of 54 cents per gallon of imported ethanol was established to protect the U.S. Treasury from funding foreign ethanol production. Ethanol imports from certain countries were exempted from this tariff under the Caribbean Basin Initiative in order to spur economic development.

The Grassley legislation would protect companies currently using the CBI provision, but would cap the amount of ethanol that can enter the U.S. duty-free. Last spring, Cargill announced its intent to import ethanol produced in Brazil and further processed in El Salvador, one of 27 countries included in the CBI. Under the terms of the CBI, member nations may export ethanol into the United States up to a total limit of 7 percent of U.S. production per year.

Other lawmakers, including Sens. Ben Nelson and Chuck Hagel of Nebraska, have proposed legislation that would allow only ethanol produced in the United States to qualify for incentives under the pending renewable fuels standard (RFS). NCGA President Vaughan said Cargill’s plans undercut the spirit of the RFS. “The United States is on the verge of enacting the renewable fuels standard, and the domestic ethanol industry is uniquely poised to contribute to the fuel security of our nation while injecting critical investment capital into the Corn Belt,” the letter says.

© The Grand Island Independent

Source: The Grand Island Independent Sept. 08, 2004.

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