Doug Berven, Vice-President of Corporate Affairs at POET, the world’s largest producer of biofuels, discusses the importance of biofuels to sustainable agriculture and how this pandemic has created great disruption to the industry.
Doug Berven, Vice-President of Corporate Affairs at POET, the world’s largest producer of biofuels, discusses the importance of biofuels to sustainable agriculture and how this pandemic has created great disruption to the industry.
Farm Food Facts where every farmer, every acre and every voice matter. Welcome to Farm Food Facts for Wednesday, May 27th, 2020. I'm your host, Phil Lempert. Many of our farmers are in the fields preparing their crops, and let me assure you that they're committed to ensuring that this year's harvest will produce affordable, sustainable, and accessible foods, which is the backbone of our economy. But the reality is that covid-19 has created much disruption. Today we're going to talk about a very, very serious topic. It's all about biofuels. The top issue for biofuels is that they're often overlooked when it comes time to talk about the food system. Ethanol makes up 10% of the U S ag market today, and fuel demand is down over 15 per second. Okay, so Doug Berven is with us. Doug, vice president for corporate affairs of POET, uh, Doug, tell me a little bit about POET and, and what you guys do and why this is such an important topic. Sure.
Doug:Thanks for having me. Fel. So Hola is the world's largest producer of biofuels. We've produced about 2 billion gallons of ethanol on an annual basis. We also produce about 10 billion pounds of distiller's grains from our process. Mmm. We produce about 600 million pounds of corn oil each year. That goes into different products that further reduce our need for fossil fuels. That goes into things like asphalt rejuvenation and the biodiesel industry. Mmm. We've been around for about 33 years now. And um, you're right, it has been a devastating time. Um, for the biofuels market and agriculture in general, there's no doubt about it. And you're also right that we are often very overlooked. W help people, especially in our area of the world here, biofuels are the catalyst for successful agriculture and successful agriculture is the key to solving so many of the world's most pressing issues like climate change, poverty, hunger and disease. All those things are critical and only ag is situated to be able to address them in a major, major way.
Phil:So I guess my, my question is with the importance of biofuels, and I don't think that the average person understands just how important biofuels are. And I'll get to that in a second. Why isn't the biofuels voice being hurt? Well, Phil, oftentimes we're drawn out by a louder voice, which is our competitor, the oil industry. I mean, let's just face it, right? Spend, if we spend a dollar, uh, on advertising, they spend a hundred, we spend a dollar in lobbying in Washington D C they spend a hundred, I mean, biofuels are a cheaper cleaner, better domestic, yeah. Product for the U S fuel supply. Well, we're taking market share from the most powerful political force on the planet and that oil and they're not going to give it up, uh, without a fight. And we're seeing that in every corner, whether it be marketing or politics or anything else, it's just a, it's a pretty vicious cycle.
Doug:Well, we want to do is we want to make a free market for fuels out there. Let the consumers choose. Right now we've got a monopolized market that's just being dominated by the oil industry. And you see that in the headlines all over them. They're asking for all kinds of breaks and giveaway isn't waivers and things like that. The reality is if we want to address climate change, if we want to address agriculture, we want to address consumer costs, human health, all these things, okay, I'm going to have to limit the use of fossil fuels. It's transportation is a huge issue. Biofuels offers the solution to cleaner air, better human health, a lower cost fuel in a higher performance fuel. There's no doubt about it. So I mean, we can talk all day about the benefits of biofuels, ethanol, agriculture. But to your question, we're just drown out by a much louder voice with a much deeper pockets. That's, that's the actual reality that we're facing here.
Phil:Well, I think one of the opportunities is really to explain to everybody from consumers to the white house and so on. The role in agriculture, for example, when I talk about biofuels to people and I say, do you know that as a result of, of ethanol? Yep. Carbonation for beer, for you know, sodas for all kinds of food products and people eyes open up and they just don't understand that. They've never heard that before. And now if we look at Anheuser Busch and all the big brewing companies, they have a serious issue because you're not up to capacity.
Doug:Yeah. Well that's absolutely true. I think Poland itself provides about 5% of the U S food grade CO2 supply in this country. That's a lot of CO2. Yep. Biofuels industry I believe, produced somewhere near 40% of food grade CO2. So you're right, whether it be the bubbles in your diet Coke or your Budweiser or the dry ice that goes to meat packing clients or the co two that's used in water treatment clients. Mmm. That's a critical aspect. But nobody's even talking about it. The other thing that people don't realize, and this is just the most basic for a lot of your listeners understand this. When we make ethanol, we only consume the starch of the corn, right? All the protein, all the fiber, all the o il g ets used i nto other markets and products. Like I said at the beginning, we sell just our company s ells w hat, 10 billion pounds of protein to livestock, t o u m, the poultry industry, the f ishing industry all around the world. And if it wasn't for ethanol, creating that market for grain today, you wouldn't have all that protein going out t here. You would have$ 2 corn today, which is still a fear of ours through this whole[ inaudible] issue right now, but$2 corn is not good for the United States. It's not good for the f armer. I t's not good for the consumer. And$ 2 corn would absolutely ruin global agriculture. I mean the ripple effects of biofuels right now, m e t oo much better understood. We t alked about some of the H ighline t hing, but just think of the amount of H ornick would go back on the farmer if we didn't have, if we weren't providing that market. The U S ethanol industry today, this is going to buy 35 to 40% of the U S form. Crop travel is down 50% half of our industry is shut down. That means we're putting all that form right back on the American farmer. That's depressing prices. When we have two to$3 corn or corn under the cost of production, we've subsidized those farmers. Those farmers send cheap rain around the world and we ruined global agriculture. I think for generations we've been programmed to believe cheap corn means abundant food or abundant grain and everybody eats. If the American farmer can't make a profit in agriculture, how can the rest of the world afford to farm? We need to create markets that balance the commodities system. Okay. Biofuels or the only market that can grow fast enough to keep up with the ever increasing yields. Rain today, population isn't growing that fast. That's farms are growing that fast. The only thing that can keep up, it was really more biofuels and we want to balance that commodity system and agriculture, so subsidies aren't necessary. There's a profit in agriculture and the rest of the world will benefit from a margin in agriculture. I mean it's, it's something that people really aren't thinking of, but they really need to. Why do you think the United States produces 175 bushels per acre when you know the rest of the world is probably averaging somewhere around a hundred bushels per acre? It's not because our land is so much. It's because for generations we have stifled global agriculture because we sent cheap subsidized grain around the world. So there's thought that sheep brain means eats. There's 180% the wrong direction. We need a margin and agriculture. So that's so that agriculture can be produced sustainably and economically around the world.
Phil:Obvious. Obviously you're talking to farmers all the time. Okay. What are you hearing from those, those corn growers right now? What are, what are they saying to you besides the, the harsh reality of the economics that you've just laid out very clearly, um, what is their future look like? Are they concerned about the future?
Doug:I think farmers are saying today what they have said for a long time. Look, we will cash a check. Well, we'd rather have a market when everybody, I mean, yeah, that check is a short term bandaid or a really major injury. You've got to have a longterm solution for agriculture in this country, in this world. And you don't do that by subsidizing. Oh, so you do that by providing markets that can create longterm benefit for agriculture. Okay. You know, back to my original statement, biofuels are the catalyst for successful agriculture. Successful agriculture is the key to solving these major problems. If agriculture isn't profitable, how can we ask our farmers to do more if they're just breaking even right? The margin in agriculture, we can incentivize farmers for the latest and greatest precision farming and no till farming and cover crops and buffer zones and all these types of things. But if there's no margin and we're just writing a check for them to break even, how can we expect to really improve accuracy culture to address these well problems, climate change, poverty, hunger and disease. Biofuels balances those commodity markets and makes it easier to get us the solutions that we're looking for through agriculture rather than just getting us to the next day eventually.
Phil:So look into your crystal ball, um, which is always a tough one, especially in today's economic environment. What does it look like in a year from now?
Doug:Well, we're working on a number of things. We're working on getting higher blends of ethanol into the market place so that our industry can grow along with the ever increasing yields. We don't need more land. We just need markets for the land that's currently in production. Mmm. If this country moved from 10% of the U S fuel supply, the 15% of the U S fuel supply, that would be a market of almost 2 billion bushels of grain for the American farmer. There is a real solution for American farmers that doesn't create a shortage for anybody. It creates a balance for what we're currently producing. That's all. I mean, Phil, right now we are likely to see more than 3 billion bushel carry out. Of course, and that's not healthy for anybody. We haven't seen that. I don't know if we've ever seen that number before, but that means that prices are going to be depressed for a long time. It's going to take a long time to make it through all that extra corn out there. And, the same thing goes for beans and wheat and everything else. Global surplus, they're going to be way up, which means that prices are going to be w eighed down. Just to give you an example of an example of how the biofuels industry has really helped American agriculture over the last several years, our industry really started growing in the early two thousands we went from about 1% of the fuel supply to 10% of the fuels supplied from 2000- 2012. In that time, farm incomes went up dramatically. Since we've plateaued at that time, since the year 2013 to today, army incomes are down more than 50% across the country, 50% decline because our industry isn't keeping up with the ever increasing y ield. And when you have yields going up and d o you have, a nd being stagnant, you've got prices going down, and that's, that gets to our whole problem, not only around the ethanol plants that are shut down, b ut our nation and the world as a whole. I mean t he, the ripple effect is monumental.
Phil:So Doug, let's talk a little bit about the role of biofuels. Covid-19 and human health.
Doug:Yeah. Thank you Phil. So there are, there is a real serious growing body of evidence right now that Covid is being spread by particulate matter throughout the atmosphere and it is affecting lower income neighborhoods in particular because they're the ones it was right around. The travel w ays, right. All those cars traveling down the interstate cause a considerable amount of pollution. Part of that pollution is what we call particulate matter. PM 2.0 Harvard just came out with a study. A number of different groups are coming out with studies saying, y eah, h e is carried by that particulate matter a nd i t's, it's a social t hing that's j ust t his issue that doesn't have to be ethanol reduces particulate matter i n gasoline exhaust we burned completely. Whereas the competitive molecules to ours, they don't. They get out into the, out into the Airstream. We breathe them deep into our lungs, causes major, major health problems hold it is exasperating this information. It didn't start it. We've known about particulate matter. We've known about health concerns from, from vehicle exhaust for a long time. The internal combustion engine is going to be around for a long time, regardless of what people want thing it's here now. It's here to stay for a long time. We need a better liquid fuel. Ethanol is that better liquid fuel? Not only are we better for our environment, all those things that we've talked about helping agriculture, um, challenge, climate change and those types of things. We're directly better for human health. We will reduce disease in this country and around the world using more ethanol. There's no doubt about it. So there is a direct link to current epidemic that we're into right now. And just another reason to get more biofuels into the field.
Phil:So when we talk about ethanol, yeah, we're talking that it should go from 10% two 15 30% will there ever be a day where we do a hundred percent ethanol?
Doug:I certainly hope so. You know, Henry Ford, when he divided, when he developed model T back in the early 1900 1908, I might be off on my dates, he built that model T to run on ethanol or gasoline and he had a little knob on the front dash where you could actually change the air intake to optimize your vehicle. Right. And until the twenties and thirties, when we had prohibition and taxes and prohibition eliminated the ethanol industry. Well, at John D Rockefeller, a monopoly on the fuel market in this country. We were running cars were running on a hundred percent ethanol. There's no way there. There's no reason you can't do it today. The Indy racing league runs on 85% ethanol today. Uh, NASCAR runs on 15% ethanol. All these other performance leads are using 50% to a hundred percent ethanol because they get so much better performance out of it. And they're not bleeding. Breathing in these nasty for you. Healthier people. We're using biofuels. So for, from a performance and a health standpoint, all the performance leagues are going there. Mmm. So there isn't any reason. We can't go to a full ethanol blend, but we've got to tackle a couple of things. Uh, number one is the resistance that we get from the competitive group that's, that's going to lose all of their market share before we go. So yes, we can, but let's take it step by step. We'll go from 10 to 15 to 30% and we'll prove to the American consumer that ethanol is here are your product economically, human health, climate change, agriculture. We'll prove all those things. All we ask for is a free market. We'll go get it done.
Phil:So Doug, we talked about some of the uses, um, of, of ethanol for, you know, food packaging for beer, for soda. What are some other things that ethanol can do for us?
Doug:Well, I like to say that we can make anything out of a bushel of corn that the oil industry can make out of a barrel of oil. It's just a matter of chemistry and economics. Give me, give me an example that's pertinent today during covid 19. Absolutely. Uh, right now, uh, well it has changed some of its manufacturing to do hand sanitizers and sanitizer was Mmm. It was soaked up off the shelves. There wasn't any thing to do. The world health organization, FDA, a number of other groups. Asked for M mm. More hand sanitizer because so critical to staff, the spread of t hem. G eez. W ell a t v antage together we h ad engineers, lawyers, u h, business folks working literally around the clock to make hand sanitizer. U m, that was pharmaceutical grade. That was o kay. B ye. The FDA approved by world health. M mm. The toxicology was proven by a hospital system here in Sioux falls as to be perfectly safe for human health. So now we've got a renewable alcohol t hat's o kay. Perfectly safe and available, u h, to the general public because we have, we have transformed three of o ur c lients w ill be able to make hand sanitizer t o h elp stop the spread of this disease. And it's u m, yeah, we started by f eeling a lot of that product away to the city of Sioux falls, the state of South for first responders and now we're offering it at retail stores here in Sioux falls. We're also offering it online at sanitizer. Oh Mmm Mmm. So that product will be out there.[inaudible] you know, pharmaceutical grade ethanol hand sanitizers will be a new market for us. There's no doubt about it. Uh, we're excited about that. But it started as the right thing to do, Phil. I mean we ha we are, we are in an opportunity where we can provide something to help stop right. Of this disease. And that's why we did it first. Yeah, I see your question. We have all kinds of opportunities to expand products, not only enhanced sanitizer, not only in asphalt rejuvenators not only in different feed products, but bio-based plastics and other renewables. It's an exciting world out there and we're just, we're very anxious to really get after that. Okay. it's very, it's very sad that we had to do this from a hand sanitizer standpoint. We're just lucky we're in a position to help.
Phil:And equally important now I know where to get my hand sanitizer from.
Doug:Absolutely.
Phil:Well, and also, I guess what, what I'm hearing loud and clear is we've got competitors, um, overseas selling oil that we're competing with versus helping the us economy and the U S farmer with ethanol. So for me, you know, of being a layman, this isn't rocket science. I mean if it, if it helps everybody, um, and, and it makes us less dependent on foreign oil, why aren't we upping it to 15% or 20%, if in fact the production can handle it?
Doug:Yeah. Well that goes back to the old he said we were talking about before, it's political. I wish we could introduce some common sense these areas. The fact of the matter is we are taking market share from a very political force that doesn't want it to go away. And you know, through this whole covid thing, I think it's, there've been some things revealed. Number one, we have too much dependent on OPEC. Yes, we might have a lot of oil in this country. We can't compete on price with OPEC. OPEC countries produce oil for less than$10 a barrel. The average cost of production in the United States is about$36 a barrel. Okay. So a full pack wants to hurt our oil production, our energy system, our economy. They can just run the price down like they have and put people out of business. In the oil industry. We have a domestic product in ethanol. Okay. Keats economically against oil, we have a better value proposition in the gasoline pool then the competitive molecules to ethanol in the gasoline. Well, and I don't want to get too in the weeds here yet, but we replaced ethanol is an octane component. Okay. Ethanol sells for typically almost a dollar less per gallon than the competitive molecules oil that makeup octane in the fuel supply. So not only are we domestic and we can help our eggs situation, we reduce the price of fuel, um, for the consumer, reduce our dependence on foreign oil. And by the way, we reduce our dependence on China buying our ag products, which that's a topic of concern today as well. Right? So biofuels, agriculture are really the only thing that are going to reduce our dependence on not only Oh pack and foreign oil on our reliance on China's buy our products as well. We can do it right here at home. We can balance our market and make these foreign countries. Um, I would say less critical to our economy our environment, all kinds of things. Certainly our agriculture. So yeah. Um, the product is there, the yields are there. The potential for agriculture in this country and around the world. Phil are frankly untapped. I mean, we know that agriculture can do unbelievably unbelievable thing. We used to get all of our food, energy and everything else that ag can provide from above the surface of the land. We did that 200 years ago. Right? And we will do that 200 years from now and hopefully we'll do that 10 years from now or 20 years from now. We need to reduce our dependence on fossil fuels dramatically. And agriculture is the only thing that's gonna provide that solution. If we've got a climate problem in this country, it's two reasons we've been taking oil and coal out of the ground, putting it in the atmosphere. That's right. Yeah. Agriculture comes from the surface of the land. We rejuvenate CO2, we recycle, we put energy and we book a world back and its natural balance. That's, that's why I'm saying biofuels are the catalyst to successful ag and successful ag. The key to solving all of these wish. So the plants are running at 50% capacity. Couldn't you just run at a higher capacity and store the ethanol thanks are full. Well, I mean the oil is full. You saw oil go below zero in cost for a day. That's because nobody's got a rail car to put any, any fuel in anymore. They're all full. And so our problem is if there isn't anywhere to go with it, we don't have and option, but to shut down, slow down. Mmm. Luckily now we're seeing some, uh, increases[inaudible] travel and the market is coming back a little bit. Certainly not where we want it to be. Um, but we'll get back to normal and I hope we can take some of the lessons that we've been learning over the last two months, three months and apply that so we don't have to deal with a number of these situations. Again, we need to reduce our dependence on foreign countries for either our ag purchases or our oil production and I'm just here to tell you we can reduce dramatically the amount of fossil fuels we learn we use in our fuel system today and 15% they'll just, I'm just need to throw this out. 15% is an end point. That's our starting point. We do 1520 30% we can do that. We have to do that. We will do that. It's a matter of timing, but we have to get over this hurdle first. We got to break that barrier and then I think the markets will open up and we'll see consumer demand really starting to place, but right now we've been in this 10% fuel supply thing for the last, what, seven, eight years now. We've got to get over that hump and just prove that our product is period gasoline. It's domestic, it's cleaner, better for human health. We can go on and on, but I'm really excited about our future. As long as the American public understands realities and doesn't fall into the myths and the traps, food versus fuel or whatever those things are, um, you know, it, if you hear something negative about biofuels, you can ask the question, where did that information come from? Because it's not coming from us and it's not coming from reality. It's being put out there because that's what they want you to think.
Phil:Well, Doug, um, first of all, thank you for a very, very clear, um, understanding of, of biofuels and you know, we've got to get this message out there. As you said repeatedly, it's important for farmers, it's important for agriculture, it's important for our nation and our, and our security and our safety. And it's important for people, people who are on the planet. So Doug, thanks so much for joining us today on farm food facts.
Doug:Thank you Phil.
Phil:Thanks for listening to today's podcast episode. For more information on all things, food and agriculture, please visit us@usfarmersandranchers.org also, be sure to look for us on Facebook at us farmers and ranchers or on Twitter at USFRA. Until next time.