Recently I watched John Stosell’s program on “Politician’s Top Ten Promises Gone Wrong.” Ethanol’s promise gone wrong was surpassed only by the housing subsidy bubble and the promise that more and bigger Europe-style government was the answer to the future.
Six years ago, when President Bush expanded the corn ethanol mandate, I wrote that producing more corn ethanol would take too much of the scarce prime cropland the world needs to produce its food. Almost immediately, in 2008, a spike in oil prices created a global shortage of corn, with food riots in two dozen countries. (The price of corn is inevitably global.)
Now this year’s Corn Belt drought has brought us face to face—again—with high-priced hunger for the world’s poor, no answer to global warming, and a sinful waste of the world’s currently scarce financial resources.
It’s now obvious that corn ethanol is too expensive to burn, and burning it is driving world food prices too high. The tragedy is that corn ethanol isn’t even needed! We’ve had no global warming trend in the past 15 years, even though CO2 levels in the atmosphere keep rising.
The UN is now reduced to pleading with the U.S. to suspend its ethanol mandate—to prevent food price poverty for the world’s poor. Apparently, they don’t talk to their own Intergovernmental Panel on Climate Change, which has ardently pushed “renewable fuels” not only from corn, but from jojoba and switchgrass.
This year’s corn yields are expected to be the lowest in six years. The Department of Agriculture is predicting that corn prices, which were below $2 per bushel in 2007, will soon reach $9.00 per bushel. U.S. livestock and poultry producers, far more numerous than our corn farmers, are in a state of shock over their sky-high feed costs. Consumers will start getting their new, far-higher bills for groceries months from now, but rest assured they’re coming.
However, Secretary of Agriculture Tom Vilsack—a former Iowa governor—says the corn ethanol mandate is “creating jobs.” That’s as close to lying as an honorable man should get. The farmers are producing the corn with bigger machines, lots of nitrogen fertilizer, and cropland shifted into corn from cotton and wheat. There are only a few hundred more jobs in the ethanol plants.
The farmer impact of the high corn prices, unfortunately, has also been predictable. The price of farmland that can grow corn has doubled. It’s a classic case of farmers driving up their own production costs with another government “bubble.”
The farmers’ next step would be to drain more wetlands and clear more woodlots for still-more corn. That’s why congress has set a limit: only 15 billion gallons of corn ethanol can be made per year. However, the corn farmers have already gotten approval from the Environmental Protection Agency for gasoline with 15 percent ethanol. (The President wants more renewable fuels!) No one is betting that the EPA won’t approve E-85 in a second Obama term, and never mind the potential engine damage to cars, boats, and mowers.
Vilsack is still claiming that providing about 10 percent of our auto fuel from ethanol has “moderated” our gasoline prices. Far more of such credit goes instead to the non-subsidized shale gas and oil producers—who pay tax dollars in instead of taking them out. Yesterday, diesel was over $5.00 in DC, hard to call that “moderated.”
Corn farmers are good people, pleased to be blessed with government largesse. However, they should take no more pride in their high subsidized profits than the promoters who got big Energy Department grants for now-bankrupt Solyndra and Fisker Automotive. When the bubble bursts, will the government bail them out too?
August 20, 2012
~ The Author ~
Dennis T. Avery is a senior fellow for Hudson Institute in Washington, D.C. and is the Director for Center for Global Food Issues. He was formerly a senior analyst for the Department of State. Readers may write him at Post Office Box 202, Churchville, VA 24421.