Cargill Looking to Import Ethanol

Corn growers criticized plans by Cargill Corporation to import Brazilian ethanol through El Salvador as a means to circumvent U.S. tariffs on imported ethanol. Compiled by staff

Published on: May 12, 2004

Cargill is being accused of stripping privileges designed to benefit underdeveloped countries to enhance their own personal profits. Corn growers are criticizing the multi-million firm for its plans to import Brazilian ethanol through El Salvador as a means to circumvent U.S. tariffs on imported ethanol.

According to a May 6 report by Reuters, Cargill plans to build a dehydration plant in El Salvador that will convert ethanol from Brazil into fuel grade ethanol. El Salvador is one of the nations covered under the Caribbean Basin Initiative (CBI), which allows up to 7% of the previous year's U.S. fuel grade ethanol production to be exempt from import duties.

In a letter to Cargill President and CEO Gregory Page, National Corn Growers Association (NCGA) President Dee Vaughan called upon the company to reconsider the proposed investment. "It is disheartening and curious why Cargill would decide to pursue an economic opportunity in Central America when farmers in Minnesota and throughout the Corn Belt are willing to invest their own capital to meet the domestic energy needs of our country," says Vaughan, a farmer from Dumas, Texas. "While this may be a legitimate and legal use of the Caribbean Basin Initiative (CBI), it runs counter to the intent and spirit of other U.S. legislation that is primarily responsible for the growth of the ethanol industry in the United States."

Vaughan called the burgeoning U.S. ethanol industry an agriculture success story. The United States expects to produce more than 3 billion gallons of ethanol in 2004. Ethanol now adds more than $15.3 billion of gross output to the American economy and is responsible for approximately 143,000 jobs.

"The numbers don't lie. Development of farmer-owned co-op ethanol plants continues at a rapid pace, resulting in hundreds of good jobs being brought to rural communities," Vaughan says. "These plants increase the use of domestically produced feedstocks and add value to U.S. agriculture commodities. Cargill has chosen instead to invest in a venture that exploits a loophole in the Caribbean Basin Initiative to bring Brazilian ethanol to the United States."

Vaughan expressed fear that Cargill's actions will erode support for the agricultural trade agenda in the United States. "Farmers and ranchers are already expressing frustration with free trade agreements, and import-sensitive commodities are rallying against efforts to lower tariffs and expand market opportunities," he says. "All Cargill plans to do is remove any water left in the ethanol that wasn't taken out in Brazil. They are taking advantage of provisions of the CBI that are designed to provide economic opportunity for those underdeveloped nations."

Vaughan says Cargill's business plan does little to help Central American nations develop, and instead is primarily an effort to enhance the profits of a multi-national commodity trading firm.

To view NCGA's letter to Cargill in its entirety, please visit www.ncga.com.