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1933 Law = Massive Profits Today

Written By Nick Hodge

Posted May 17, 2007

At its inception in 1933, the Farm Bill was thought to be just that: a farm bill. But the scope its original creators had in mind has changed greatly over the years, with 2002 seeing immense alterations.

That year’s rendition of the bill saw for the first time a section devoted entirely to energy.

You see, for years the Farm Bill was a piece of legislation by representatives of Midwestern states. The bill didn’t garner much media or public attention, as most people thought it didn’t have any effects beyond the breadbasket’s farms and fields.

How wrong that opinion was.

Unbeknownst to most, the Farm Bill–updated every five years or so–is hardly a bill at all. Instead, it’s a long-running accumulation of many diverse acts subject to periodic review and modification by Congress.

As the bill matured over the years, it began to envelop more and more topics–making it more of an environmental/food/agriculture/energy bill than a farm bill.

With more and more people starting to realize this, the 2002 edition of the Farm Bill was really the first one that gained more than a glance from Congress.

This year, though, a spotlight is being shone on this massive piece of complex legislation. And, of course, the section I’m most concerned with deals with energy.

This year’s bill already contains a number of recommendations regarding the energy sector. So let’s take this time to go through a few of them.


The recommendation that could most obviously spur profits is the earmarking of $100 million directly to producers of cellulosic ethanol. Coming right on the heels of a $385 million contribution from the Department of Energy, this could leverage increased venture investment, driving up the stock of the companies that receive the funding.

Have a peek at Bluefire Ethanol, one of the companies that received funding from the DoE a few months ago:

bluefire ethanol

Also targeting cellulosic ethanol, the bill aims to reauthorize the Renewable Energy Systems and Energy Efficiency Improvements loan guarantee programs, providing $2.17 billion of guaranteed loans over the next ten years

As if there weren’t a theme already, the bill would also allow crops for cellulosic ethanol to be grown on 27 million acres of land that is supposed to be reserved under the Conservation Reserve Program.

This will give cellulosic ethanol a big advantage as it begins to emerge as a real competitor, because it won’t have to compete with food-crop land for its feedstocks.

The final snippet relating to cellulosic ethanol is an extension of the Biomass Research and Development Act of 2000, providing an additional $150 million in mandatory funding.

When all the legislative dust settles, this bill should give cellulosic ethanol, and the companies that make it, a pretty good boost.

With that out of the way, let’s turn for a second to the recommendations regarding bio-based products. Now, Congress has about a 300-word definition for bio-based products, but they’re essentially plastics and fabrics made from plants.

A reauthorization of the BioPreferred program, created by the 2002 Farm Bill, would give $18 million toward the advancement of this sector.

Plus, there’s also a planned expansion in USDA research in this sector, to the tune of $500 million, which would focus on engineering plant genetics to make them more viable for plastics production.

And though this is a nascent industry, take a look at Metabolix Inc., a company that makes bioplastics. They have exploded in recent months.

Now that Senate committees are starting to hash out the complex political jargon in this bill (the proposal is over 180 pages), you can bet that more than a few of these recommendations will make it in there. With all the hype surrounding renewables, politicians would be fools to cast their votes against any measure supporting it.

And as the money starts to trickle to individual companies, provoking investments by venture capitalists and others, there’s going to be some serious money to be made.

And you thought the Farm Bill was just for Midwestern corn growers.

Until next time,

nick sig