Corn: it’s-not-what’s-for-dinner. Signs of the times I guess. I saw an odd story yesterday from Armarillo TV station KDFA titled:
Memorial Day cookouts could cost you more this weekend as food prices continue to rise. According to economist, food inflation is the highest it’s been in two decades. Forcing shoppers to dig deeper in their pockets for their holiday bashes.
Complete story here
Then I saw this article this morning in the WSJ:
Wall Street Journal May 24, 2008; Page A10
The state of Texas is now in official opposition to the federal ethanol mandate. Governor Rick Perry has petitioned the Environmental Protection Agency for a one-year reprieve, and the reason is simple and increasingly familiar: Washington’s ethanol obsession is hurting the state.
We all know that corn farmers everywhere love ethanol. Don’t tell that to Texas cattle ranchers. Because of the mandate to add this biofuel to gasoline, ranchers are being forced into bidding wars with ethanol plants for the grains they feed their cattle. They don’t appreciate being hammered on price because of a subsidy to corn growers. Thus, Governor Perry’s petition.
Complete story here
Don’t mess with Texas. Perhaps they’ll be the ones that will put this biofuels nonsense back in the closet until the market can figure out how to meet ethanol demand without compromising the food supply.
To be perfectly fair, a couple of recent studies by respected groups indicate that the diversion of food crops to ethanol have had an effect on food prices, but not a huge one.
In the developed countries, sure. Nearly all the cost is labor and overhead. We hardly even notice the difference.
It’s the third and fourth world countries that are seeing doubling or tripling of food prices. Those dollar-or-two-a-day places (i.e., a third of humanity) are going starving.
P.S., Rico, I agree with most of your post.
Damn. I’d like to be able to buy it (corn) at $1.00 OVER production costs here in Florida but that ain’t gonna happen.
Here’s to a rational politician running Texas. Too bad they aren’t barbecuing BEEFCAKE, like a certain Guvernator from my home state!!
Here is what the dimwit Guvernator is fighting for:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/24/BA1210TB43.DTL
That is 10 inches of fresh snow that has closed a number of Sierra passes that are normally dry, open, and WARM this time of year!! People used to a beautiful Yosemite Memorial Day weekend have had a rather unpleasant surprise!!
If they stop global warming completely we should stock up on Antarctic survival equipment!!
kum dollison,
Your economic and political ignorance is causing you to reach laughably incorrect conclusions.
Here are the facts about corn production in the pre ethanol days as it relates to cattle producers.
1.) Corn growers lobbied for corn subsidies and corn polices that resulted in corn crop surpluses. These surpluses caused lower corn prices and increased expense to taxpayers because they had to spend more money on corn price supports that went to corn farmers.
2.) Cattle producers provided a market for some of that surplus corn. This raised the price of the corn and reduced the amount of money you and the other taxpayers had to pay to the corn producers. In other words the cattle producers saved you tax money, the corn producers cost you tax money.
From this set of facts you reach the conclusion that the cattle producers are to blame for the tax money you are giving to the corn farmers.
Your economic ignorance is further illustrated by your conclusion that the mandated usage of corn ethanol, combined with the subsidy for the use of corn ethanol, on top of the tariff on imported ethanol is somehow saving you money on gasoline.
Robert Wood,
Not just Pixie dust but Good Intentions and Wishful Thinking also.
Worse still, burning oil contributes to global warming, a clear risk to California’s economy because of the projected impacts on air quality, public health and mountain snowpack.
Three lies in one sentence, nicely illustrating the chronic deception practiced by the Warmers.
CO2 has no effect on air quality.
CO2 has no effect on public health
CO2 has no effect on winter precipitation and hence snowpack.
Al Fin: “The main reasons for increased food costs on commodity markets are the higher cost of fuel and fertilizer”
These costs do not effect commodity trading for speculators. If I believe the price is going up, I will control a long contract believing someone else will pay more for it later. If I believe the price is going down, I will control a short contract. I know this is basic and I have done some lightweight trading but the essence was always “will the price move”. Speculators get in and out taking any profits they can without regard to what turmoil they leave in their wake. If you want to see a real hockey stick:
http://futures.tradingcharts.com/chart/CN/M
Using foodstuffs to produce ethanol is probably not the best idea that has come along in the recent past but don’t write off all biofuels. Some groups are attempting to turn algae into biodiesel. The most interesting ones are those that use sewage to feed the algae. This is a great idea as you take a pollutant which has to be treated before being released into the environment and turn it into a useful fuel. Here is a link for those who want to know more about this topic: http://earth2tech.com/2008/03/27/15-algae-startups-bringing-pond-scum-to-fuel-tanks/
Re Roger’s and Tom’s comments on governments messing us about, the UK Parliament’s Environmental Audit Committee has just recommended that the government introduce a radical system of personal carbon credits. Think of the costs and red tape that that will involve.
And, the Daily Telegraph has an article today “Southern Britain could be too hot for vines by 2080, says professor (Emeritus Professor Richard Selley of Imperial College London)”. When will the barrage stop?
Back in 1910, every spot of land that could grow something was growing it. Every town had its own flour mill, woolen mill, creamery, etc. And then wheat prices plummeted. Land was put out of production everywhere. It still remains idle today.
There is plenty of land in CRP programs just sitting there. If we take this land out of idleness, allow farmers a price break on diesel (most tractors burn diesel), end subsidies for crops (let market forces create price), and provide low-cost loans for product finishing and distribution that would be limited to within the same geographic area that it is grown, we could once again return to an era of cheap food prices. Locally grown, locally consumed. Anything left over could then be bought and shipped out for export. Even better, let the farmers form export coops so they can ship it themselves.
I have no problem with biodiesel or ethanol. When cars were first developed, biodiesel was the more common fuel. Then carbon fuel replaced it as a cheaper source. However, carbon fuel will never return to cheaper status because the sweet oil pools are getting sucked dry. Extraction and refinement of lower grades (IE rocks) will make it too expensive as an everyday fuel. Besides, it will take WAY more energy to produce a gallon of shale oil carbon gas then ethanol will. The above references to production comparisons are made based on sweet oil extraction and refinement, not shale oil products. But shale oil is all we got in abundance any more.
Many arguments against ethanol. One point usually missed is the major impact the questionable US Central Bank (Fed Res Brd) measures have had on price levels. This may be a major driver feeding price spikes in commodities and oil.
On bio-fuels the danger is to throw away a good idea because it had a miserable implementation. Corn-ethanol has an energy rate of return estimated at 1.3 (1.3 units of energy generated by one energy input). Corrosive ethanol transportation further decreases its EROR However there
are more competitive alternatives (sweet sorghum 8, sugar cane 8-9, crude oil EROR 20). A reasoned debate would distinguish the bad implementation (corn ethanol) from the good idea. Not all bio-fuels are created equal. Since the US will continue to face a security challenge on its energy supplies this dependency on foreign supplies could be in part addressed by smart use of bio-fuels.
Cellulosic biofuels still need research–specially with enzimatic brakedown of starches and of the lignun ring surrounding core material. But allocative inefficiency may waste taxpayer’s resources. Influential groups have gained access to public grants to build to cellulosic plants when those funds might have been significantly better allocated to cellulosic research and development.
Nuclear plants, frequently suggested as the solution, must overcome a major killer issue. Scientific American recently noted the quantity of spent fuel so far accumulated by the U.S nuclear industry (about 58,000 metric tons) currently nearly equals the capacity of the cooling pools used to hold such materials at the reactor sites. By midcentury, the amount will roughly double. Thus, instead of carbon dioxide production, our people will end up with radioactive material with pretty long half lives.
Wise energy action is indispensable. But past experience shows govenrment policies have been significantly counterproductive. A strong lobby has been created around corn, one which will be difficult to neutralize. Why? Because while many US citizens may have to pay a few pennies more, a few harvest millions. This creates a political asymmetry: an extremely attractive rate of return to their campaign financing and other “investments” in our legislative and executive bodies for the very few who milk the federal trough while the taxpayer only loses marginally and their numbers are legion.
Lessons from massive subsidies to the oil industry, and more recently the Farm Bill, demonstrate the lack of functional interest by the American polity on these vital issues. This is compounded by the cost of our energy inertia. When our voters had the option to support legislation imposing a modest energy tax (e.g., initially $ .10/gallon increasing gradually over the years) they rejected it. Now, instead of keeping those taxes in the US and benefit from solutions with lower energy consumption, we are transferring our hard earned income overseas, frequently to unsavory characters our nation can ill afford to trust.
Lack of will in the past is making our on-going energy transition more painful. Will Ford, GM and Chrysler face bankruptcy because their large profit makers (SUVs, Vans, Trucks) are no longer bought by our pummeled middle class families? Or will those families see their tax dollars allocated to massive bailouts of these firms which, knowing the price energy trends, continued their profligate ways (and bonuses to their senior) and are now paying the cost (or shifting the cost to us?).
The most recent experience on a similar behavior raises worrisome concerns: the current travesty with corn-ethanol subsidies where the middle class pays for the subsidy, and then at the pump and grocery store for higher prices caused in part by those subsidies–a negative rate of return on taxes paid?)
It is amazing we have put up with this for so long…and more startling that we might continue to do so into the future.
What can we do at the personal and local level?
1. Use public transportation
2. Burn carbohydrates instead of hydrocarbons–walk, bike
3. Don’t drive above 60 mphs.
4. Empty the trunk of your cars from “storage” loads (no golf clubs stored there–very fuel expensive); keep proper air pressure on your tires, use less electricity–yep, turns the lights off and follow other common sense measures; no one needs to freeze in the summer.
5. Organize car-pool networks
6. Write cohesive letters to your congressmen and senators. Team up with those who can provide technical information and economic impact data on your communities and their “voting pool”. Ensure those letters are read. Yada-Yada-Yada notes or acclamations in public fora are routinely dismissed.
7. Form or join politically active groups established to gain back control over our political lives. May I suggest a key point in the agenda: improve smart public transportation in your communities.
Washington is important, but in the energy and food conundrum, local government and actions may determine the future strength of our country. In the short to medium run, some believe it may be difficult to regain power over our elected officials in Washington because we lack the deep pockets required to influence them. But we have a powerful weapon: votes, and with the Internet, small political contributions ($50) from “the masses” have become cost effective. Let’s organize those votes to laser on specific issues–and hold our elected officials accountable for the delivery of suggested legislation and measures.
Speaking of “Don’t Mess With Texas”, a couple of years ago I was driving into to texas from New Mexico near El Paso. There was a sign that said “Drive Friendly-the Texas Way”
Not quite sure how to take that…
Feeding grain to cattle is a bad way to feed a world… feeding it to cars is worse.
Back when it was ESSO (now EXXON) their ad slogan was “Put a tiger in your tank”. Now, with ethanol you can literally be putting Tony the Tiger (corn + sugar) in your tank. Biofuels… they’re Gr-r-r-r-eat!!!
Just don’t look at lowered gas mileage, increased food costs, environmental costs, etc.
I’ve farmered for 35 years and yes if there is one true saying in agriculture it’s the surest cure for high prices high prices. So wait another few years and corn will be cheap again.
As far as the price of food there are several factors at play. The diversion of corn to ethaniol production. The late spring freeze in 2007 that reduced wheat yields across a wide part of the United States created a shortage of wheat. Lets not forget that hedge funds are adding to the price of food by speculation on the price of all commodities oil included.
I am so suprised that people have so quickly frogotted the value of ethanol added to gasoline at the 5% level to reduce air polution do we really want to go back to MTBE.
Over all give Amnerican farmers a few years and we can produce more corn,soybeans,and wheat than is needed
Evan Jones: (16:26:18) : It’s the third and fourth world countries that are seeing doubling or tripling of food prices. Those dollar-or-two-a-day places (i.e., a third of humanity) are going starving.
That may be the case. Still the same, I think it would be a mistake to blame it all on biofuels. I think it’s pretty obvious that there are other issues involved. Failures in complex systems in all sorts of contexts usually have many causes, and I would argue that the global food distribution system is no different in that regard. That said though, I think it’s obvious that adding biofuels to an already stressed system doesn’t help. So it seems to me that there should be a really good explanation to warrant it. And so far as I can tell, all of the explanations I’ve heard so far basically fall into one (or both) of two categories: (1) wishful thinking, or; (2) greed. But I accept the possibility that I may be wrong. I am, after all, just an interested amateur trying hard to make sense of it all. In that light, IMO, the best argued position in favor of biofuels is that offered by Vinod Khosla. Whether you agree with the guy or not you have to appreciate how willing he is to (1) explain his point of view, even to serious and high profile skeptics, and (2) put his money where his mouth is. If it were not for people like Khosla, I’d have turned the corner on crop-based biofuels long ago.
That being said there is, of course, other solutions (though not necessarily “orthogonal”, or “either/or” ones) to the whole transportation energy problem besides biofuels. And the one that is becoming increasingly obvious is “electrons” — batteries. As luck would have it, there are some interesting tie-ins there to Austin and the surrounding area, too. One of the companies that has made quite a buzz lately is EEStor of Cedar Park, TX (en.wikipedia.org/wiki/EEstor). Supposedly they’re working on an ultracapacitor with some incredible characteristics. But they’re still working in stealth mode. So although their partners (Zenn Motors and Lockheed Martin) remain optimistic it’s hard to say what will happen. Their first commercial production plant is scheduled to be completed by the end of the year, so I guess we’ll see. By the way, much of their equity appears to come from Kleiner Perkins Caufield & Byers (aka “KB”), of which Al Gore is now a partner. Al Gore not withstanding, I really hope they’re for real. If they are, their product could be a real game-changer. If it does, it could make Al Gore a very, very rich man. But I don’t care about that. Whatever works.
Along the same lines is AFS Trinity (www.afstrinity.com). They recently came out of stealth mode and are now on a cross-country tour to show off their prototype car: a converted Saturn Vue small SUV that they claim puts out up to 370HP and get up to 150 mpg. They do it more with thought innovation rather than technical innovation: they used off-the-shelf components to put an ultracapacitor front end on an otherwise run-of-the-mill gasoline/plug-in electric hybrid. Check out their video page (btw, some of the videos were shot in — you guessed it — Austin). What’s interesting about these guys is that their product is available now. All they need are distributors (they hope to attract the interest of the major automakers).
In addition to that, Nissan, Toyota, and Honda have all recently announced plans to invest big bucks in “next generation” battery production (where are the US companies?). They just didn’t do it in Austin, lol! Anyway, electric vehicles and hybrids are definitely on their way to a showroom near you. Heck, even big rig manufacturers are developing hybrids. That doesn’t obviate biofuels, but it does help to mitigate their impact on an over-all solution. After all, if batteries eliminate a substantial portion of the need for on-board liquid fuels in the near term, sustainable replacements for on-board fossil fuels can be pushed back further into the long term. And that would be a good thing, too.
Pamela Gray,
here is how to get light sweet from rock:
http://money.cnn.com/2007/10/30/magazines/fortune/Oil_from_stone.fortune/index.htm
The real issue is whether the Enviro Catastrophists will allow us to burn ANYTHING that produces Plant Food at a reasonable price!!!! I can see the same issue with the gentlemen who have introduced new methods of producing fuel from algae.
Re water to create ethanol, I’d like to see the numbers on this. Where I live corn is planted and grows sans irrigation (it rains in the summer here) so any water used in the process must be at the ethanol plant itself. Are these much touted numbers estimates and averages of growing corn in arid regions? They certainly don’t apply here.
I’m not sure why the advice re gasoline price needs to result in me driving slower or taking some other measure to conserve. Over 60% of the oil used is NOT used for fuels of any sort, but products. Seems to me that reducing the use of plastics in packaging would be a start — I neither need nor want to toss 1/2 lb of plastic blister pack that I can barely open to purchase 2 AA batteries; chinese restaurants seem to be able to make take-home using paper products and not styrofoam; landfills are awash in el cheapo plastic toys that lasted 2 days before they broke. I wonder how much oil is needed to create containers for the pure water environmentalist types prefer… and I’m supposed to drive slower?
Nuts.
Re biofuel debate, I’d like to see a serious look at where every gallon of crude oil goes before I worry about doing 60 on the interstate. My guess is that cutting back on plastic packaging nobody really wants anyway would pay for the ethanol experiment until such time as the technology matures (i.e. isn’t using corn.) Overall I think biofuels are a good idea — oil is too valuable to simply burn (or waste on blister packs for batteries.)
My guess is that cutting back on plastic packaging nobody really wants anyway would pay for the ethanol experiment
I think they use byproduct for that.
RE: Reduced price of gas with Ethanol (kum not kim).
Passed a station on my way down to the cities this weekend, Unleaded $3.85, E-85 $3.05. At 70% the mileage (a generous, governmentally estimate) E-85 should have been at $2.70 for parity.
This, by the way, is E-85 country, having been available for about 5 years.
How come the disparity, kum?
Oh, and the corn crop was three weeks late getting in the ground, and we had a freeze in the northern half of the state last night. Watch those futures sky.
Personal responsibility:
1. Use public transportation
In my neck of the woods, public transportation is centralized, where urban sprawl renders it useful only for the rich or very poor.
2. Burn carbohydrates instead of hydrocarbons–walk, bike
One is responsible for producing less CO2 by driving to shop for the meat one eats to walk or bike or skate, than to do so for that purpose.
3. Don’t drive above 60 mphs.
Although it will change, my commute is about 160 miles per day, I normally drive with traffic to be safe, not to save 15 minutes or 5 bucks.
4. Empty the trunk of your cars from “storage” loads (no golf clubs stored there–very fuel expensive); keep proper air pressure on your tires, use less electricity–yep, turns the lights off and follow other common sense measures; no one needs to freeze in the summer.
I live out of my car; are you kidding?
5. Organize car-pool networks
Ah, you are kidding.
6. Write cohesive letters to your congressmen and senators. Team up with those who can provide technical information and economic impact data on your communities and their “voting pool”. Ensure those letters are read. Yada-Yada-Yada notes or acclamations in public fora are routinely dismissed.
I don’t write often for fear of arrest by the FBI and/or Secret Service. I have issues.
7. Form or join politically active groups established to gain back control over our political lives. May I suggest a key point in the agenda: improve smart public transportation in your communities.
I don’t like people, they don’t like me, peace.
American economy in crises – a long time coming
When a country and its society import more than they export for over a quarter of a century, it is bound to erod the economy to its primate state.
We have only ourselves to blame, what goods and products are we exporting, what goods and services are produced in the USA, the answer is very little by comparison.
In the past 50 years as our population has increased, technology advanced, we have become a nation that consumes enormous amounts of resources, we shop for competitive prices. Corporate America is constantly looking to increase the bottom line.
Most of the goods for and by Americans and its companies are produced overseas and in the past decade with the advancement of telecommunications, many of the services sector are also imported.
The increased costs of energy over the past 10 years, has affected the economy to unimaginable comprehension.
This economic activity has eroded our economy to its core. It seems that the situation is getting worse every year. American debts are increasing beyond our wildest dreams, endangering the future economic vitality of our future generation.
I hope it is not too late for our society to recognize the graveness of our economic predicament and its resolve to take appropriate action to stem the tide of our economic downturn.
Americans are a nation of great technology and knowhow. We must utilize that technology and our resources to find new means to regain our economic independence.
We must face and implement fiscal responsibility, both by the government and the population with its infrastructure of corporate America.
It is no longer an option, it is a must if we as a nation want to survive and retain our way of life and economic vitality.
Inflation, recession and financial crises are here. Let us take the bull by the horn, initiate immediate actions to minimize and hopefully reverse our economic crises.
Jay Draiman, Northridge, CA.
PS
The US economy has enormous momentum. Metaphorically speaking, if someone turned off the locomotive that drives the US economy, the economy would go on for miles before anyone would likely notice something was wrong. But something has been wrong for many years. Is there really hope for the future? Maybe. But the terrible truth is that no one really knows. But if there is hope, we’re already on the wrong track. And that has to change..
American economy in crises – a long time coming
The increased costs of energy over the past 10 years, has affected the economy to unimaginable comprehension.
Yes, and, Congress is getting set to add to those costs with the upcoming “Climate Security Act”. They have already paved the way with declaring polar bears “threatened”. We are our own worst enemy.
JD: Your concerns seem genuine, but as I see it, they are misplaced.
Where to begin?
When a country and its society import more than they export for over a quarter of a century, it is bound to erod the economy to its primate state.
No. First, we have imported more than exported for a heck of a lot longer than a quarter century. During that period, the US went from a superindustrial to postindustrial economy and saw the greatest growth in our history.
If the trade deficit disappeared tomorrow, our economy would totally go down the tubes.
Besides, cheap imports from China have done the poor more good than all the welfare programs put together. And are a natural wedge against inflation. In 1970 you had to pay $40 for a pair of shoes (a BIG expense in 1970, not only because of inflation, but because of MUCH less wealth banging around).
Now you can get acceptable shoes for $15 dollars. Excellent shoes cost $100 (i.e., MUCH less than $40 a la 1970).
American debts are increasing beyond our wildest dreams, endangering the future economic vitality of our future generation.
No. Plain old no. Total debt is around nine month’s worth of GDP. The deficit, even with the war, is minuscule in percentage terms. You have to consider national economy in percentage terms, not in absolute amounts, just as you do in normal day-to-day living.
Most of the goods for and by Americans and its companies are produced overseas and in the past decade with the advancement of telecommunications, many of the services sector are also imported.
Our economy is no longer based on mindlessly banging things together and reading off of cue cards. That is a GOOD thing.
Americans are a nation of great technology and knowhow. We must utilize that technology and our resources to find new means to regain our economic independence.
technology and knowhow ARE our economic independence. Rejoice that what you want to “regain” will plague us no longer!
Inflation, recession and financial crises are here.
Are here, were here, always will be here. The climate is not the only thing that works in cycles. And it’s the free market that has pulled our nuts out of the fire every time. Let us not “take the bull by the horn”. It solves nothing and annoys the bull. And brings on the bears.
Fortunately we are in an extended period of “Economic Warming” and the “positive feedbacks” are very real! (Unless we put our wellmeaning governmental foot in it and screw it all up.)