Corn Trading Executive Urges Congress to Take Strong Action on CAFE Standards

Peter Kordell has been in the grain trading business for almost forty years and can't recall having ever seen the kind of growth in corn demand currently being caused by ethanol. As President of Slipka Financial Partners, a commodity trading company in downtown Minneapolis, his eyes are trained on the corn market which the company and its clients actively trade.

Minneapolis, MN (PRWEB) June 25, 2007 -- Peter Kordell has been in the grain trading business for almost forty years and can't recall having ever seen the kind of growth in corn demand currently being caused by ethanol. As President of Slipka Financial Partners, a commodity trading company in downtown Minneapolis, his eyes are trained on the corn market which the company and its clients actively trade.

In a recent interview Mr. Kordell spoke of the exploding demand for corn. "Corn demand for ethanol increased 24% last year and is on pace to grow 35% this year. Next year the US Department of Agriculture is forecasting an increase in demand by 58%.

"For the first time ever, the demand for corn for ethanol now exceeds exports. In two years, at current growth rates, it will exceed the demand for livestock feed, and in three years, it will be the number one demand sector; exceeding all other sectors combined."

He also stated that in two years, it is forecast that Iowa and Nebraska will have to import corn from other states to meet the demand for feed and ethanol. It will no longer have corn available for export. Kordell believes this will hurt our trade deficit since the U.S. relies heavily on grain exports to offset our high import costs of foreign oil.

"The benefits of developing alternative sources of energy far outweigh our continued reliance on foreign oil" Kordell states as he looks out on Minneapolis from the Grain Exchange. "I don't want to restrict the development of the ethanol industry just because it may cause the price of corn to finally be at a level that the farm community can realize a profit without government subsidies. Instead, I prefer to find ways for us to use less energy through increased mileage performance standards for the vehicles we drive."

Kordell's office is contacting Congressional members of the House Energy & Commerce Committee to enact strong measures to increase the corporate average fuel efficiency (CAFE) standards. By using less fuel, Kordell believes consumers will get better use from the ethanol produced and surely reduce some of the upward price pressures on the cost of food.

"We can achieve higher mileage performance standards by providing the public with the incentive to buy vehicles that offer greater fuel economy." He believes this can be done with a revenue neutral tax that rewards those that purchase automobiles with better than average mile per gallon (mpg) ratings.

The solution he is suggesting would require the Environmental Protection Agency (EPA) to calculate, each year, the weighted average mpg for all vehicles sold in the U.S. They would sum the number of vehicles per model times its mpg rating for that class and divide that sum by the total number of vehicles sold. If that average number was 22 mpg, then any vehicle sold that had a rating less than that would pay a tax, while buyers of vehicles above that number would receive a payment.

As an example, suppose there is a tax of $100 for every mile per gallon less than the average. If the average is 22 mpg and a vehicle had a 17 mpg rating, then that buyer would pay a $500 tax. On the other side of the average, a vehicle with a 35 mpg rating would entitle the buyer to a payment of $1,300.

Each year, a new average would be calculated and applied. In addition, Kordell believes congress should consider increasing the tax and payment amounts to $125 per mpg in the next year and keep raising the amount each year until we reached our goal, whatever that may be. He also suggests that if Congress wanted to provide additional incentive to consumers that this could be an annual tax and rebate that follows the vehicle and is reoccurring, not just at the point of initial sale. Thus, rebate buyers would continue to receive an annual payment for that vehicle.

Because this tax is revenue neutral, it should be easy for Congress to support. "This proposal provides the consumer with the incentive to switch to better performing vehicles. It also calls for sacrifice on the part of those who choose not to contribute to our effort to reduce our dependence on foreign oil."

So which vehicle drivers would most likely be paying the tax side of this equation? The EPA's Fuel Economy Guide for 2006 reports that the lowest mileage vehicles are made by Audi, BMW, Mercedes, Jaguar, Porsche, Infiniti, and high end Chrysler and GM products. Therefore, it is fair to say that if buyers can afford one of these very high priced automobiles, then they can probably afford the tax.

"This solution puts the responsibility for change in the hands of the public, who I believe are ready to do their part. The plan gives the buyers of fuel efficient vehicles the extra cash to pay for the increased costs of technological advancement that the auto industry will have to provide.

"If they can't sell it, they won't build it. In the end it will be consumer demand that will push CAFE standards higher. All we need is the incentive. This plan offers that incentive."

Peter Kordell, President

Slipka Financial Partners

Minneapolis MN

www.slipkafinancial.com

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