Bio-fuel subsidies actually subsidize confinement stocker cattle production

by Allan Nation

WASHINGTON: The diesel engine, invented by Dr. Rudolph Diesel in the 1890s, predated diesel oil fuel by many years.

The original diesel engine was designed to run on vegetable oils. At the 1900 World’s Fair, Diesel ran his demonstration engine on peanut oil.

Several years later, a new petroleum “fraction” was discovered between kerosene and oil as part of the refining process.

This “fraction” was found to be suitable as a fuel in a high compression engine and was named “diesel” after the engine.

Thanks to a cheap and abundant supply of fossil “diesel” the engine was modified to use this fuel in preference to the more expensive vegetable oils.

Dr. Diesel believed this was a mistake and that the world would someday return his engine to the vegetable oil fuel for which it was originally designed. With the recent run-up in oil prices, interest in bio-fuels has increased.

Enough sun energy falls on the face of the earth in a day to fuel the entire world’s energy demands for 12 months.

Oil producing plants can be used to capture this sunlight as carbohydrates, which can then be refined into fuels for compression-ignited engines such as the diesel.

Such vegetable oil fuels are considered “carbon neutral” as the plant used “fixes” as much carbon dioxide during its growing cycle as what is released. Emissions are said to be reduced by 60% compared to diesel oil.

In Germany today, there are more than 200 small to medium scale oil plants producing “rapsole” (rapeseed oil) for fuel, human and livestock consumption.

Currently some 5000 German cars and 1500 service stations are selling pure vegetable oil. Several large truck fleets have converted, at least two trains, and 100 farm tractors.

Vegetable oil is also being used to produce electricity and heating.

Starting in 2006, European farmers will be paid a 45 Euro per hectare ($23 an acre) subsidy to grow oilseed crops.

This subsidy circumvents the WTO oversight on production subsidies by calling itself an “environmental” subsidy, which are exempt.

Running compression-ignited engines on pure vegetable oils requires minor modifications, which prevents the subsequent use of diesel fuel oil.

This means that a whole distribution and retailing infrastructure must be built if pure vegetable oil fuels are used.

To avoid this, in the USA vegetable oils (primarily from soybeans) are mixed with diesel oil to make what is know as bio-diesel. Truck engines can run on this mixture with no modification. However, American diesel engine warranties are invalidated if more than 5% vegetable oil is used for fuel.

Bio-diesel’s rapid growth in the USA is being fueled not by high oil prices but by a new $1.00 a gallon government subsidy.

Even with $50 a barrel oil, bio-diesel is not competitive with diesel oil at America’s low retail fuel prices.

A gallon of pure bio-diesel costs $2.65 to produce. The dollar subsidy brings it to $1.65, which is approximately what it costs to produce diesel fuel from $50 a barrel crude oil. Thanks to the subsidy, bio-diesel production is expected to double in 2005 to 60 million gallons. New plants springing up across the country are expected to double this amount again in 2006.

The problem is that it requires energy to grow, harvest and process these crops.

According to David Pimental of Cornell University, ethanol production from corn requires 29% more energy input than it produces in output.

Bio-diesel is said to only require 2% more energy input than it produces but only if one figures the value of the residual as cattle feed.

However, cattle consuming the residue are the critical factor in all bio-fuel production economics.

Tad W. Patzek, a chemical engineer at the University of California, Berkeley, told Forbes Magazine that he calculates that without the value added to the residue by the cattle, the vegetable oil fuel requires 27% more energy than it produces. This is nearly as energy inefficient as ethanol production.

The net effect of all bio-fuel subsidies is a new government subsidy for confinement cattle production as all bio-fuel plants have to have nearby feedlots to dispose of - and add value to - the residue.

Since these residues have had most of their carbohydrates removed in the fuel, they are most useful for stocker cattle production and will therefore compete directly with highly energy efficient graziers more than current grain finishers.

With recent WTO rulings threatening current crop subsidies, apparently Congress has found a new way to subsidize industrial agriculture.

“We are chasing phantoms,” Patzek told Forbes Magazine.

“And we are chasing them because they produce valuable subsidies. We are being duped.”

© by The Stockman Grass Farmer

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