The biofuels boom offers both hope and peril for farmers and rural communities. We need to address the potential pitfalls now, while we still can.

The benefits are substantial – well paid jobs and a commodity price boom the likes of which we have not seen since the 1970s. But long-time observers who have seen it before are counseling caution. We would be wise to pay some heed.

Production costs are skyrocketing. Some landlords are charging for the opportunity to just bid on land. One Nebraska farm was rented for $330 per acre. Farm machinery prices have increased by more than 15 percent. If the bubble bursts, farmers will be left with higher production costs and communities with job losses and with businesses closing.

The biofuels bubble is not invincible. With fuel prices topping $3 per gallon and heading for $4, the range of alternatives to farm-based fuels and the research to develop them is expanding dramatically.

The new prosperity is also vulnerable to policy changes. The ethanol tax credit provides over $1.40 per bushel of corn used in ethanol production. And federal renewable fuel standards keep demand growing. But those policies are drawing increased scrutiny.

Rural people should be at the forefront of shaping federal policy to develop the biofuels industry at a pace and in manner that sustains both the land and prosperity for the long term. Here’s what we recommend:

Federal incentives for ethanol production should be tied to conservation standards. Fuel demand is so great, we could exhaust the nation’s land and water in all-out production and still serve only a fraction of the market. Legislation that raised the goals for renewable fuel production was correct to require that it not all come from grain.

But the new emphasis on biofuels from cellulose also presents conservation challenges. Taking too much crop residue for ethanol production degrades the soil. Grass-based systems should focus on mixed grass systems that produce more energy and support more wildlife. Not only do we have a moral obligation to protect the land, it is the only way to secure long-term public support for biofuels.

Federal biofuels incentives should discourage corporate control of the industry and encourage ownership by family-size farms, community members, and plant employees. The common good is best served when the business of rural America is in many hands.

Federal incentives should pace the growth of biofuels production to provide prosperity that can be sustained over time. Overheating the short-term boom ensures a future bust. Boom and bust cycles go with commodity production. But government policy should not exacerbate it.

Now is the time to set responsible standards for biofuels production that sustain the land and sustain the prosperity engendered by farms producing fuel. We rural people should lead the way.

Agree or disagree? Send your questions and comments to Chuck Hassebrook at 402.687.2103 x 1018 or chuckh@cfra.org.