Let Them Drink Ethanol
Essay Posted Feb 20, 2007 by James E. Nelson
Tom Dyson, an Australian commodities analyst writing back on Feb 9, has been observing some interesting headlines that haven’t received much attention here in the United States. About six weeks ago the following headline appeared in the International Herald Tribune: “China orders crackdown on food hoarding.” Although the Chinese diet does not include a lot of corn, the sky rocketing international corn prices have forced Chinese companies that have used it for animals to switch to rice and wheat. As a result grain prices are skyrocketing. Some 150 million people in China still live on less than $1 a day, according to Dyson, and the grain prices are leading Chinese government officials to predict mass starvation in the next year. In order to counteract the problem, the Chinese have released huge emergency supplies of rice and wheat.
And if the problem is that bad in a predominantly rice eating country, imagine what’s going on in a corn eating country. Dyson has been keeping an eye on this also. As he reports, at the beginning of the year, a huge angry mob of housewives vented its frustration at Mexico's President Calderon because of the rise in tortilla prices. He was making a public appearance and they pleaded with him to do something about the soaring tortilla prices. Official Mexican Government statistics say tortilla prices have risen 14% but a Northern Mexico newspaper has reported price jumps of 400% since last summer. Calderon didn’t react to their pleas and so two weeks ago 70,000 protesters marched through Mexico City waving tortillas and taunting the president. president.
Dyson then gets right to the heart of the matter: “The problem here is simple. The United States is the world's largest exporter of corn, and many nations rely on U.S. corn for food. Japan, Mexico, Taiwan, Canada, Egypt and Colombia are all big corn importers. According to statistics at the National Corn Growers Association, the United States grew 42% of the world's total corn crop last year. And the news get’s worse: According to BusinessWeek, ethanol production will consume half of the United States annual corn harvest by 2008. In other words, the craze for biofuels is about to chew up 20% of the world's corn harvest.”
I have previously written about the folly of ethanol and since then the ridiculousness of the situation has become much more apparent. Of course the farmers are going to support ethanol production because corn prices are going through the roof and that’s good for their bottom line. Farmers are heavily weighted away from soybeans and toward corn for the summer of 2007. Seed soybean sales are down so dramatically this winter that soybean companies and soy oil producers have had an all out blitz advertising attack trying to get farmers to put more acreage into beans this spring. In the Sioux City market the soy oil companies had, not only one, but two advertisements aimed at farmers during the Super Bowl.
And again, as is the case with all welfare programs, the real problem is the politicians. And make no mistake about it, ethanol is a corporate welfare program; there would be no profit in it if it weren’t heavily subsidized by the various government agencies. Politicians are intelligent men and women and they have to realize that the benefits of ethanol over gasoline are marginal while the side effects—especially the water use and the resulting potential damage to the aquifers—could be catastrophic to the Midwest.
These things have been bothering me for quite some time. But the price of tortillas in Mexico City was the farthest thing from my mind. It took an Australian commodities analyst to make me aware of that growing human disaster, as well as the dire situation in China.
But why should we care? We have our ethanol and pretty soon E85 will be widely available. Why should we worry about the Mexicans. Let’s just get that fence built along the Rio Grande and fill up our fuel tanks again. Who knows, maybe we can even export the stuff to China to help even out our trade deficit.
Our American lack of balance and perspective is truly amazing.
Copyright © 2007 James E. Nelson (Just Another Jim). All Rights Reserved.
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