Ethanol good for U.S. agriculture: poll

By Christopher Doering

SAN ANTONIO (Reuters) - U.S. farmers believe overwhelmingly that ethanol has been good for American agriculture, believing the renewable fuel has boosted their bottom line, a straw poll conducted by Reuters showed on Tuesday.

Makers of the alternative fuel are expected to consume 3.6 billion bushels of corn, or about 30 percent of the U.S. corn crop, to make ethanol during 2008/09, up from about 23 percent the prior year. A study by Informa Economics forecast ethanol to climb to 34 percent of U.S. corn production in 2009.

Nearly 80 percent of the 820 farmers surveyed at the American Farm Bureau Federation's annual meeting in San Antonio said ethanol was beneficial for agriculture, but 17 percent of respondents said it did more harm than good.

The Farm Bureau is the nation's largest farm group, representing producers of cattle and hogs as well as growers of cotton, wheat and corn.

"Anything that creates an additional demand for your product you have to consider a positive," said Hal Swaney, a corn, soybean and livestock farmer in Missouri.

"Obviously, it's not fair if you're a cattle producer in a place where there is no ethanol plant. You can't reap many of those benefits," such as DDG, he added. DDG, or distillers dried grain, is a byproduct of the ethanol production process used as an animal feed.

The Reuters poll found that, despite the U.S. recession, lower oil demand and recent financial problems in the ethanol sector, about 55 percent expected some of their corn crop to go toward production of the renewable fuel this year.

Once the cornerstone of the United States' plan to wean itself from foreign energy, ethanol has been sharply criticized by the food industry and aid groups for diverting corn away from livestock and foodmakers, pushing world food prices up.

Even farmers were aware of the criticism, with 35 percent of those surveyed saying ethanol's biggest impact was creating higher livestock and feed costs as well as higher food prices.

Farm and biofuel groups, along with the U.S. Agriculture Department, have deflected that criticism, saying factors other than ethanol are primarily to blame, including volatile oil prices and increased global food demand.

After years of rapid growth, ethanol has begun to show its age. But the government's so-called renewable fuels standard, which requires the use of 11.1 billion gallons of renewable fuels in 2009, should help growth during the next few years.

USDA Chief Economist Joe Glauber told Reuters he expected the growth of ethanol use to slow considerably, but said its future course would be largely determined by fuel consumption rather than the government standard.

"Production will continue to expand," said Glauber. "There is no question about that."

But some analysts and the Renewable Fuels Association, which represents the industry, are forecasting consolidation among ethanol firms due to tighter operating margins and less demand because of a drop in gasoline use. USDA has cut its projection for corn used for ethanol by 400 million bushels in two months to reflect these concerns.

Already the industry has claimed one large casualty as VeraSun Energy Corp, the second largest U.S. ethanol producer, filed for bankruptcy in October.

One bright spot for the industry could be President-elect Barack Obama, from the Corn Belt state of Illinois, who has pushed ethanol since he was elected to the Senate in 2004.

Obama has pledged higher renewable fuel standards for advanced biofuels, such as cellulosic ethanol, building out distribution infrastructure and mandating "flexfuel" for vehicles.

(Editing by Walter Bagley)