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Ethanol and the Presidential Election

The farmer and the cowman won't be friends.

12:00 AM, Sep 26, 2008 • By DAVE JUDAY
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Further, the Nebraska Cattlemen are "opposed to any additional federal or state mandates for ethanol usage and/or production." That anti-mandate position was adopted in December 2006--before Bush proposed and Congress adopted a mandate that ethanol and biofuels grow from the prescribed 7 billion gallons of use to 36 billion gallons of use. The Nebraska Cattlemen still oppose that mandate, and any more to come. Yet Obama is calling for ethanol mandates to be expanded from the current 36 billion gallons to 60 billion gallons.

The National Turkey Federation comes from the same perspective as the Nebraska Cattlemen--that ethanol raises feed costs to turkey producers. And guess what? Nebraska's only turkey plant just announced it is now shutting down because it is losing too much money.

Indiana Pork Producers have been, and remain, anxious about ethanol policy for all the same reasons. One industry spokesman there recently referred to the pork industry as corn's long time "wife" having to put up with the flaunted new "mistress" of ethanol. In short, if the McCain campaign is serious about tightening the message, there is plenty to work with. At least as much as Obama has to work with in trying to tell Nebraska cattlemen and Indiana pork producers who were getting anxious over a 7 billion gallon ethanol mandate in 2006, that if elected in 2008 he'll push for 60 billion gallons of mandated biofuel use.

Both the National Pork Producers Council and the National Cattlemen's Beef Association (NCBA) went out of their way for the Bush campaign in 2004. NCBA broke tradition--and lost members for doing so--in endorsing Bush, then felt totally shunted aside when Bush pushed a 35 billion gallon mandate in his first State of the Union after the election (when Congress passed the mandate they added 1 billion gallons to Bush's proposal to make the total 36 billion gallons).

Whether the McCain campaign will tap into that sentiment of resentment among livestock producers, or whether Obama can make gains in the Corn Belt proposing more support for ethanol remains to be seen. My guess is that McCain has the political tide turning his way. But this is a real issue, in a real close race. Indeed a race that is perhaps closer than in 2004 when Bush and Kerry were campaigning in the last two weeks of the race on a much smaller farm issue than biofuels--i.e. the extension of the $200 million Milk Income Loss Contract (MILC) payment for dairy farmers in Minnesota and Wisconsin.

McCain should at least--via surrogates like the Obama campaign has used Nelson and others--push back with a litany of the unintended consequences of ethanol, from input costs to livestock farmers, to food inflation, to overloaded rural infrastructure, while livestock producers, food consumers, and rural voters are experiencing them.

Dave Juday is a commodity market analyst.