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New IRL Ethanol Deal Angers U.S. Corn Growers - Fears Rise About Brazilian Supplier Entering Midwest

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Anthony Schoettle - Indianapolis Business Journal Staff

Indianapolis, IN November 29, 2008: The Indy Racing League suddenly finds itself at odds with Midwestern farmers over a decision to make a Brazilian consortium its ethanol supplier starting next year.

“The decision to bypass the more than 180 ethanol biorefineries across our country in favor of a tanker ship from Sao Paulo to be the official supplier of fuel for the [Indy Racing League] is an affront to America’s farmers … and all Americans who have fought and are fighting for our energy independence,” Bob Dinneen, president of the Renewable Fuels Association, fired off in a letter to IRL executives.

The dust-up caused IRL officials to call hastily arranged meetings Nov. 24 and 25 with the Iowa Corn Growers Association, Indiana Corn Marketing Council and National Corn Growers Association. Officials for the Iowa Speedway, which hosts an annual IRL race, the Iowa Corn Indy 250, sponsored by the Iowa Corn Growers, also sat in on the meetings.

“It is disappointing and frustrating to our members Brazil came in as a sponsor,” said Craig Floss, CEO of the Iowa Corn Growers Association.

Brazilian ethanol producers have been trying for years to get the United States to lift its 54-cent-a-gallon tariff on foreign-made ethanol—an expense the Brazilians agreed to cover for the IRL. U.S. ethanol producers are convinced Brazil will use its relationship with the IRL to push for removal of the tariff. IRL officials said they have no interest in taking sides.

“We find it interesting we’re put on the defensive for using a renewable fuel, ethanol, while every other race series is using petroleum-based fuel. And we know where that comes from,” said Terry Angstadt, president of IRL’s commercial division.

Angstadt said all sides at last week’s meetings came to a better understanding of one another’s positions. But IRL officials still plan to travel to Brazil Dec. 8 to finalize their agreement with Apex-Brasil. In an odd compromise meant to appease U.S. interests, Apex-Brasil will buy American ethanol to supply the IRL—at least in 2009. After that, it will probably shift to Brazilian-made ethanol.

“This is definitely a branding initiative by Brazilian ethanol makers to strike at the heart of American-made ethanol,” said Larry DeGaris, director of academic sports marketing programs at the University of Indianapolis. “Remember, the IRL’s strength in the U.S. is Midwestern corn country.”

Brazil found its opening with the IRL in October, when financial concerns caused the Omaha-based Ethanol Promotion and Information Council, a coalition of some of the largest U.S. ethanol producers and refiners, to back out of its promotion and supplier deal with the series.

The IRL, which has been using 100-percent fuel-grade ethanol to power its race cars the last two seasons, agreed to the deal with APEX-Brasil in mid-November. Though financial terms of the multiyear agreement were not disclosed, the deal includes free fuel—about 120,000 gallons a year, ad buys during the series’ race telecasts, and components involving corporate hospitality and mobile marketing, Angstadt said. Motorsports marketing experts estimated it is a high-six-figure or low-seven-figure annual deal.

Several American ethanol producers outside the EPIC umbrella came forward to offer their services as a supplier during last week’s meetings, Angstadt said. But IRL officials think it’s too late to change course, plus motorsports marketers said independent American suppliers would have difficulty matching APEX-Brasil’s resources to feed money and promotional muscle into the series.

The United States and Brazil are the world’s top two ethanol producers. American ethanol is made from corn and Brazilian ethanol is born of sugar cane, but both work in automobiles virtually the same.

“You don’t have to be a corn-belt politician or an international-trade wonk to understand the potential conflict here,” said Dennis McAlpine, a New York-based motorsports analyst. “I see the series is trying to harvest all they can, but they have a real balancing act to maintain.” •