Recently, I’ve heard and read that part of the cause of the Egyptian situation is due to U. S. ethanol policy. It seems that if corn wasn’t used for ethanol it could be used for food, even though very little field corn is consumed directly by humans.
Just thinking out loud here, let’s explore that argument.
Let’s assume we used zero bushels of corn for ethanol. Then we wouldn’t have any ethanol to burn in our cars. We’d have to replace that fuel with traditional oil, the majority of which comes from the Middle East. Our energy independence would be in jeopardy. And what would the price at the pump be for gas $5 or $6 wouldn’t be out of the question. Instead of food inflation causing riots in other parts of the world, we’d have fuel riots in our part of the world.
Aside from the fuel argument, lets look at what ethanol has done for the ag economy. Before ethanol got up and running in the 90s, agriculture was suffering through some tough times. The 80s were not ag friendly. Foreclosures were common nationwide. The future of ag wasn’t bright. I remember discussing this with my dad. He wanted to know if I wanted to farm, I told him its tough to make a living with $3 wheat. He told me people will always need to eat so there will always be a need for a farmer. He was right. I think its safe to say, in my area anyway, the poor farm economy of the 80s pushed most kids of the 80s off of the farm (myself being an exception).
Most of wheat research today is still being done in the public university system and funded by grower checkoff dollars or federal dollars in the form of (gasp) earmarks. With the rising prices of wheat, that is starting to change and we are getting more private investment in wheat. When ethanol got started, farmers could make money growing corn. Realizing farmers actually had some money to invest in better seed, the ag companies started doing research into making that better seed. That snowball really grew and now there is a lot of research being done in corn seed. That research has resulted in national corn yields increasing by about 25% between 1992 and 2010 and an increase of almost 10 million acres planted. A look at wheat yields over the same time would show an increase of 18% per acre but a drop of 15 million acres in production.
If we take corn ethanol out of the picture we have a number of disturbing results. First, we import more oil from countries that don’t necessarily like us and export our hard earned dollars to them. And who knows, maybe the national guard would be stationed at gas stations across the country. Second, we would lose another generation of farmers. And third, we would have no research dollars in corn, we would have corn yields that didn’t keep up with demand, prices of other commodities (like wheat and soybeans) wouldn’t have followed corn’s leadership in price advances. Doesn’t sound so simple does it.
Just some food, and fuel, for thought.