DTN writer Chris Clayton reported on yesterday’s hearing, (link requires subscription) noting that, “Ethanol is drawing a lot of attention with a hearing last week in the U.S. Senate, a hearing Tuesday by the House Energy and Commerce Subcommittee on Energy and Air Quality and yet another hearing slated on ethanol production for Wednesday, again in the Senate.”

The DTN article added that, “Policy on corn-based ethanol is moving on two tracks in Congress as committees dealing with energy re-examine the renewable fuels standard while the farm bill is focusing on tax policy. The 2008 farm bill, which is in conference negotiations, would reduce the ethanol blenders’ credit given to petroleum markets from 51 cents a gallon to 45 cents a gallon, but the farm bill also would extend the current 54-cent tariff on imported ethanol.”

Peter Shinn and Tom Steever reported yesterday at Brownfield that, “Tuesday’s hearing isn’t the last on the matter. Wednesday, Dr. Bruce Babcock, the Director of Iowa State University’s Center for Agriculture and Rural Development, is slated to testify before the Senate Committee on Homeland Security and Government Affairs on fuel subsidies and their impacts on food prices. The hearing comes amid calls by nearly a quarter of the U.S. Senate to roll back the RFS.

“But Babcock told Brownfield Tuesday, even if Congress immediately repealed the RFS, it probably wouldn’t cause lower corn prices, at least not right away. According to Babcock, Congress would also have to eliminate the ethanol blenders’ tax credit and end the 54 cent-per-gallon tariff on ethanol imports to have the kind of impact on the industry that might reduce its demand for corn. And Babcock said the plain fact is, with U.S. ethanol industry production capacity nearing 13 billion gallons a year, corn prices are inextricably tied to crude oil.

“‘The economics of corn ethanol are positive when you have high crude oil prices,’ Babcock explained. ‘So even if you were to get rid of the federal policies, that high crude oil price will keep those plants operating and we’ll have high corn prices.'”

With respect to oil prices, Jad Mouawad reported in today’s New York Times that, “Oil jumped to another record on Tuesday, and the government said it expected gasoline prices to peak at a national average of $3.73 a gallon in June, just as the summer driving season kicks off.

“The new forecast from the Energy Department came on a day oil futures rose above $122 a barrel in New York trading after rebels in Nigeria renewed their attacks against oil installations. By day’s end, crude oil for June delivery closed at a record $121.84 a barrel, up 1.6 percent from Monday’s close.

“Oil prices have nearly doubled in a year.”

And Associated Press writer Stevenson Jacobs reported yesterday that, “Corn futures surged near a record high Tuesday after crude oil spiked above $122 a barrel and forecasts for more rain in the U.S. corn belt threatened to put farmers further behind in their planting schedule.As crude oil climbs further into record territory, gas and alternative energy markets have also risen, boosting profits for U.S. ethanol makers who use corn as their basic feedstock.”

The AP article stated that, “Corn for July delivery added 12.25 cents to settle at $6.0625 a bushel on the Chicago Board of Trade, after earlier rising as high as $6.22, just below the contract high of $6.2875.

“Also pushing up prices were forecasts for light rain in the western U.S. corn belt states of Iowa, South Dakota and Minnesota. Weeks of heavy rainfall have already left fields too soggy for heavy machinery, leaving only 27 percent of this year’s corn crop planted so far- the slowest pace since 1995, the U.S. Department of Agriculture said in a report Monday.”

Meanwhile, Associated Press writer H. Josef Hebert reported on yesterday’s renewable fuels hearing: “‘Our enthusiasm for corn ethanol deserves a second look. That’s all I’m saying, a second look,’ said Rep. Jane Harman, D-Calif., at a House hearing Tuesday where the impact of ethanol on soaring food costs was given a wide airing.

“In a dramatic reversal, ethanol has shifted from being an object of widespread, bipartisan praise to one of derision, even among some of its past supporters.”

The AP article stated that, “The uproar over ethanol is clearly gaining momentum.”

In other developments regarding biofuels, The Wall Street Journal editorial board stated today that, “To create just one gallon of fuel, ethanol slurps up 1,700 gallons of water, according to Cornell’s David Pimentel, and 51 cents of tax credits. And it still can’t compete against oil without a protective 54-cents-per-gallon tariff on imports and a federal mandate that forces it into our gas tanks. The record 30 million acres the U.S. will devote to ethanol production this year will consume almost a third of America’s corn crop while yielding fuel amounting to less than 3% of petroleum consumption.

“In December the Congressional Research Service warned that even devoting every last ear of American-grown corn to ethanol would not create enough ‘renewable fuel’ to meet federal mandates. According to a 2007 OECD report, fossil-fuel production is up to 10,000 times as efficient as biofuel, measured by energy produced per unit of land.

“Now scientists are showing that ethanol will exacerbate greenhouse gas emissions. A February report in the journal Science found that ‘corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years . . . Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%.’ Princeton’s Timothy Searchinger and colleagues at Iowa State, of all places, found that markets for biofuel encourage farmers to level forests and convert wilderness into cropland. This is to replace the land diverted from food to fuel.”

However, Robert McFarlane, in an opinion item published in today’s Wall Street Journal, indicated that, “This week in Congress, efforts are underway to roll back goals enacted just last year to encourage the development of biofuels. This could damage ­ perhaps irretrievably ­ the substantial progress we’ve made toward relieving the threat posed by our reliance on foreign oil.”

After detailing some specific policy proposals, Mr. McFarlane noted that, “Some say that these mandates are contrary to free-market principles. But one could say the same thing about seat belts, air-bags and even the FM radios mandated during the Cold War to assure the government’s ability to broadcast nuclear alerts.

“No one argues seriously that these things have not been in our interest. And just imagine how valuable it would be to reduce the $460 billion we will spend on foreign oil this year, or the threat to our economy that its disruption would represent.

“We must not let this national debate be distorted by charges that one is either pro- or anti- oil. I believe strongly that Western oil companies ought to be supported in the production of as much oil as they can, for as long as they can. Reducing our reliance on foreign oil is, however, an urgent national security priority.”

In an update posted yesterday at her blog, EU European Commissioner for Agriculture and Rural Development Mariann Fischer Boel stated that, “Back in January this year, I explained in this blog how biofuels fitted into the EU’s developing policy on energy and climate change.

“Since then, biofuels have become a very fashionable issue ­ but not in a helpful way. Public anxiety about sudden rises in global food prices has whipped up a storm of media controversy, and in the confusion, biofuels are seeing the ills of the world laid at their door.”

Commissioner Fischer Boel added that, “In any case, as I explained today at a conference organised by the European Policy Centre, recent price movements have relatively little to do with biofuels.

“The EU uses less than 1 % of its cereal production to make bioethanol. The US uses more, but its domestic maize production has responded quickly to biofuel demand ­ so that the US has managed to produce more bioethanol and raise its exportable maize surplus. This has temporarily displaced soya crops to some extent, but we expect the global soya supply to respond rapidly.”

In other EU developments related to food prices, Andrew Bounds reported yesterday at the Financial Times Online that, “Biotechnology companies, who argue they could help solve the global food crisis, are hoping for a boost tomorrow as regulators attempt to overcome the deadlock over growing genetically modified food in the European Union.

“With just one crop, an insect-resistant maize, approved for cultivation in the past decade and after several governments instituted GM bans in recent months, in violation of EU law, the European Commission has called for a rethink of the process.

“Commissioners are to thrash out a policy tomorrow, in what campaigners on both sides say could be a decisive moment for the industry. The Commission has generally backed biotech products but been foiled by national governments, wary of the lack of public appetite for them.”