# Fuel vs. Food Debate Facing Cargill, ADM



## bioman (Mar 1, 2002)

Tuesday, May 16, 2006
Associated Press

Archer Daniels Midland Co. (ADM), by far the country's largest ethanol producer, has taken an aggressive approach to biofuels including ethanol and biodiesel. Cargill Inc. has been more restrained, though it's hardly sitting on the sidelines.

Recent comments by the chairmen of both companies mirror a larger debate taking place on how big of a contribution ethanol can make toward reducing America's need for oil imports, and whether using more corn to make more fuel will lead to higher food prices.

Minnetonka-based Cargill raised the food-versus-fuel issue earlier this month. As he laid out a broad vision of Cargill's business on a changing global playing field, Warren Staley, its chairman and CEO, told a gathering of business writers here that he saw producing food as the most important task for agriculture.

Noting that a number of countries are looking at ethanol and biodiesel to lessen their dependence on Mideast oil, Staley said, "We have to look at the hierarchy of value for agricultural land use: food first, then feed and last fuel."

Staley questioned whether subsidies for using land to produce fuel were good long-term policy and questioned the idea that ethanol could put a big dent in America's dependence on foreign oil. Even if the entire U.S. corn crop were used for ethanol, it would replace only about 20 percent of domestic gasoline consumption, he said. The next day, the chairman of ADM, G. Allen Andreas, responded by insisting the world has plenty of capacity to grow food.

"There is no consumption versus combustion debate, except for those who really don't recognize the realities of the way this business functions," he said in a conference call with analysts.

Malnutrition and hunger, he said, come from "a lack of infrastructure and a lack of capital" around the world, not from diverting some food to fuel uses.

Neither company made their executives available to elaborate on the comments. Bill Brady, a Cargill spokesman, said one of Staley's main points is that the company sees itself first as a food company.

ADM has seen a sharp run-up in its stock price, partly due to investors looking for ways to get in on the ethanol boom. Its shares reached an all-time high of $46.71 last Thursday. It was trading in the $18-$19 range a year ago. Cargill is privately held. In his speech, Staley said Cargill's sales revenues have increased from $48 billion in 2001 to $71 billion in 2005 and will rise again in the fiscal year that ends May 31st, but did not break out how much of that growth came from ethanol.

Ethanol plays a much bigger role for Decatur, Ill.-based ADM, which claims about one-fourth of U.S. ethanol capacity. About 5 percent of its revenue comes from ethanol, and it's aiming to boost annual production to 1.5 billion gallons, up from its current 1 billion.

And in what's been widely seen as a sign of the importance of ethanol in ADM's future, ADM went to the oil industry for its newest leader. Last month it hired Patricia Woertz, a former executive vice president at Chevron Corp., as its CEO and president.

Steve Suppan, director of research for the Institute for Agriculture and Trade Policy, a Minneapolis-based think-tank, said ADM has reaped big dividends from lobbying the government over ethanol subsidies and mandates for its increased use in gasoline.

Since Cargill is larger and more diversified, it doesn't need to place as big of a bet on ethanol as ADM, Suppan said. Cargill's non-food businesses include marketing electricity, making and trading steel, and offering financial risk-management products to companies.

"ADM is famous for their willingness to spend lots of money on lobbying," agreed Hank Williams, vice president for fuels with Jim Jordan & Associates, a Houston-based consulting company. "... They may very well have plans to further those efforts and help themselves to larger markets in the future."

But Cargill, despite Staley's comments, is making its own substantial investments in biofuels - $1 billion worth. Currently No. 4 in U.S. ethanol production, it plans new plants that would push its annual capacity to 230 million gallons, which would put it close to the No. 2 spot.

And it has a joint venture with Monsanto Co. that's developing new production technologies. Both Cargill and ADM also have significant biodiesel expansions under way, mostly in Europe.

One reason for Cargill's relative restraint is that it generally views subsidized industries with caution because subsidies can change over time, Brady said.

*Congress passed the Energy Policy Act last July that mandates doubling the use of ethanol in gasoline to 7.5 billion gallons by 2012, and President Bush gave the industry a strong endorsement in his State of the Union speech in January.*

The U.S. now has 97 ethanol plants with an annual capacity of nearly 4.5 billion gallons, according to the Renewable Fuels Association. About 39 percent of that capacity is farmer-owned. Another 35 plants and nine expansions with a combined capacity of more than 2.2 billion are under construction, the trade group says.

Daniel Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley, said the food-versus-fuel debate is "a big red herring" because the U.S. "by any measure is an overproducer of food."

"A richer farm sector is going to make us more secure, it's going to make more food available," Kammen said.

But Williams, the consultant, said concerns about food versus fuel are valid. About 15 percent of the U.S. corn crop is currently used for ethanol, and new and expanded plants easily could raise that to 45 to 50 percent, he said.

"Which is probably not sustainable," he added. "We have people to feed, animals to feed, and exports of corn that need to be made."

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Due to the build up of ethanol and the use of corn as the primary ethanol fuel source, this issue has been in the back of my mind for some time.

A couple of thoughts come immediately to mind...

Does a corporation have any responsibility to grow food for humans vs. grow food for the highest profit business product???

Does a corporation have any responsibility to view morality questions in its business mission or statement???

Lastly, what are the pros and cons to ND's anti-corporation law???


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## Bobm (Aug 26, 2003)

There has been a lot of discussion down here about wood ethanol which the claim is much more efficient to make.

The paper industry has been in decline for some time world wide probably due to the digital age replacing a lot of paper. I'm guessing that this may provide a new area of income for paper producers and for marketing pines previously grown only for paper production.

http://www.nccp.ca/NCCP/pdf/Wood_Ethano ... vs%20corn'


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## The Norseman (Jan 8, 2005)

Good morning everyone,

No, a corporation does not have any responsibility to grow food for humans.

Corporations are in the business of making a profit for their stock holders,
that's Econ 101.

A business mission or statement can be made but, the reality is they are in business to make money not give things away.

If we can't negoigate a reasonable price for oil (say $50 per barrel) with the rest of the world we should not feed the world at a reasonable price, there should be some kind of embargo on every country in the world right now (I know Unions would really like that).

Our food exports should be a barganing chip, that way farmers could finally get in the black.

See yeaw.


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## Bobm (Aug 26, 2003)

The problem with that is the people that need the food have no say in oil production or export. I don't see americans supporting starving people over oil and I am thankful they wouldn't.

We need to change our useage habits in the short run and our fuel source in the long run.

I hate to say it but I would like to see our shale oil production and other alternatives subsidized by a tax on foriegn oil to keep the price of foriegn oil high enough that domestic shale oil, methanol, solar wind ect. is cost effective and actaully developed.


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## Bob Kellam (Apr 8, 2004)

> Does a corporation have any responsibility to grow food for humans vs. grow food for the highest profit business product???
> 
> Does a corporation have any responsibility to view morality questions in its business mission or statement???


This get into a sticky morality issue, Corporations as a rule are in the business of making a profit for their shareholders, partners, siblings, etc. Can a corporation be held morally responsible to do what is possibly the correct thing in lieu of profit from supply and demand. Some would say yes, however, a business in a capitalistic society should never be looked at in a negative light for making a profit as long as it is made within the bounds of current law.



> Lastly, what are the pros and cons to ND's anti-corporation law???


http://www.legis.nd.gov/cencode/t10c061.pdf

*10-06.1-07. Industrial and business purpose exception*. 
*A corporation or limited liability company that is not engaged in the business of farming or ranching may own or lease land used for farming or ranching when the land is necessary for residential or commercial development; the siting of buildings, plants, facilities, industrial parks, or similar business or industrial purposes of the corporation or limited liability company; or for uses supportive of or ancillary to adjacent nonagricultural land for the benefit of both land parcels. *The farmland or ranchland while not being immediately used for any purpose of the corporation or limited liability company must be available to be leased by persons who farm or ranch as sole proprietorships or partnerships, or by corporations or limited liability companies allowed to engage in farming or ranching under section 10-06.1-12.

ADM and Cargill can basically do whatever they want in ND as far as building ethanol plants and processing facilities. I think one of them just announced construction of a new ethanol plant in ND.

The pros and cons as related to the above topic are numerous. Here are a few that come to mind.

Pros: they will possibly bring employment opportunities to rural ND and they could provide a stable price base for crops if enough could be produced locally to sustain the plant.

Cons: the need to supply the plant could increase the plowing of the prairie, CRP areas of ND. Possible environmental hazards. Most of the profit from the plants would go out of state. Feed lots for the by-products from ethanol production.

ND's anti-corporate farming law boils down to a few things. It is in place to keep land from going out of production and into a non-taxable status, and to keep ND farm/ranch land from being purchased up by the corporate giants outside of ND's borders. I may very well be looking at this in a much to simplistic way, but the basic premise I get from reading the code is "keeping ND land in ND hands for the purpose of farming/ranching"

There are sections that deal with the ability of land going into "natural" status but the requirements are such that a true non-profit would be hard pressed in my opinion to be able to jump through all of the hoops without getting snagged.

That is my take on the subject.

Bob


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