We can’t blame ethanol…at least not this year.
As much as I disapprove of ethanol, I’m afraid it is not as simple as that. If you’ve read my earlier post, The Futility of Ethanol, you know I’m no friend of ethanol. Ethanol is a National embarrassment. We’ve spent most of our years here on earth developing better ways to convert abundant, inedible energy into food and now we’re going to reverse that process? I don’t think so. President Bush announced the Advanced Energy Initiative in January of 2005, placing an adulterated demand on corn, doubling the price and corrupting everything related to it. According to the Renewable Fuels Association we produced 6.485 billion gallons of ethanol in 2007 consuming about 2.326 billion bushels of corn. Thanks to a 19.5% increase in corn acreage and an ideal growing season setting near record yields, we produced 2.54 billion more bushels of corn in 2007 than we did in 2006 easily covering the demand for ethanol. Considering the chart below, the 19.5% increase in corn acreage was clearly at the expense of soybeans and cotton, down 15.7% and 29.1% respectively and NOT at the expense of wheat or rice. Domestic wheat acreage actually increased in 2007 Rice acreage was (as always) flat and insignificant.
Globally production of corn, wheat & rice continue to grow…….
FAS-USDA (Foreign Agricultural Service)
So for 2007, it’s fair to say that ethanol had little or no impact on the precarious situation we now find ourselves in, thanks to a benevolent Mother Nature and the cannibalization of soy and cotton acreage. 2008 will be entirely different. Projections are already calling for a REDUCTION in corn acreage, which should be real interesting and an increase in wheat and soybean acreages. Never mind what Mother Nature might have in store for us.
We can’t blame subsidies either.
Subsidies are wrong, abused, embarrassing and in my opinion, unconstitutional. But let’s be realistic. According to the Environmental Working Group, the American taxpayer provided about $34.75 billion in farm subsidies over the 3 year period ending in 2005. That’s about $11.58 billion per year, $7,502 per recipient, $39 per citizen, about 11 cents per day. It is certainly a lot less than the $34.795 billion that the USDA spent on food stamps, or the $13.9 billion for the School Lunch Program, never mind the $5.36 billion for WIC, the $2.787 billion for natural resources and the $7.719 billion for the Forestry Service in 2007. Why is the USDA dabbling in welfare, natural resources and trees anyhow? By the way the 51 cent “ethanol subsidy” is an exemption from Federal Excise taxes, not a payment to the grower. (The White House)
So, what is the problem?
Agriculture is energy intensive, never mind getting it from the farm to the consumer. The end of April 2007 saw crude oil at $63.25/barrel. A year later it was $111.03/barrel, a 75% increase in just one year! (How can the cost of food or (anything else for that matter) NOT go up?
Our government over time has encouraged economic growth through deficit spending, thus weakening our currency. This makes our resources more attractive for export driving up the cost of what little we still produce here (like food). It also drives up the cost of anything we import like, duh, oil. Here’s a scenario to consider…
In February of 2008, OPEC sold us 149.52 million barrels of oil at cost of $14.6 billion (about $6 billion more than it would have cost a year earlier), and this is just one month from one region. What can our “friends” do with all of those petro-dollars? Well, how about investing it in American commodities, further stressing the economy, further weakening the currency, increasing the cost of oil and…..well, you get the picture. (EIA – Net Imports by Country, EIA – World Crude Oil Prices)
Global production of corn, wheat & rice continues to advance, yet ending stocks have plummeted by 84% since 2000! It’s pretty obvious that globally we are consuming more than we’re growing, not just in corn, but in wheat and rice also.
So maybe we need more acreage
In 44 years, globally, we have increased the production of grain by 144% but only on 6% more land! Remarkable…and…dangerous! We’ve increased our production by 144% by reliance not on acreage, but on genetics, technology, chemicals and…you guessed it, energy.