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President Obama's administration fears losing key swing states if it drops corn farmer-friendly quotas

It's a painful memory etched into many chapters of American history -- selling the farm.  But amid a record-setting drought many farmers fear that may be precisely what will happen.  But unlike past farm failures, this one may come not solely from nature, but from the government's decision to artificially inflate corn prices by mandating corn ethanol production.

I. Corn Ethanol - Pork 101

It's hard to understand why corn ethanol fuel in the U.S. has stuck around for as long as it has.

Unlike a handful of nations (i.e. Brazil), the U.S. lacks the resources to supply all its fuel needs with sugary food-crop ethanol.  Thus, unlike those nations U.S. automakers have been largely unable to sell pure-ethanol vehicles to consumers.  That's a game killer for corn ethanol, as it means that consumers pay more at the pump using ethanol than they would using gas as mixed-fuel engines lack the fuel efficiency advantages of pure ethanol engines.

Corn ethanol handouts
The federal government has funneled billions in handouts to the corn lobby. [Image Source: AP]

Then there's the economics -- corn is a food crop, so using it as a fuel source drives up prices on everything from snack foods (corn syrup) to beef (cows eat corn feed).  Finally, there's the environmental issue.  One of the big goals of the alternative fuels movement is to reduce emissions of carbon and noxious (nitrogen or sulfur containing) gases.  But studies have shown corn ethanol actually leads to higher emissions than gas.

Corn ethanol's strange status in the U.S. perhaps began when corn producers seized on the experimental fuel as a means of bumping the billions they already received in government subsidies even higher.  During the Bush and Obama administrations, the corn lobby opened its checkbooks to many members of Congress, and in exchange reaped a multiplier in the form of billions of grants and subsidies for corn ethanol -- all on taxpayers' dime.

Perhaps most significantly, the federal corn supporters authorized the EPA to mandate all fuel sold to contain a certain percentage of ethanol -- in essence forcing all Americans to pay for corn ethanol, even if it was bad for their cars and not something they wanted.

II. Quota Remains Last Major Handout to King Corn

As part of the government's embrace of corn ethanol, the Energy Independence and Security Act of 2007 (EISA) -- passed by Congress and signed into law by President George W. Bush -- mandated a series of ever-increasing production targets to be regulated by the U.S. Environmental Protection Agency (EPA) (a slightly ironic duty consider there was strong evidence corn ethanol harmed the environment).  The idea among corn producers who backed the bill leaning on the candidates they "funded" was ostensibly that this would force future Congresses to commit to ever-increasing subsidies.

But after the recession, public backlash against wanton government spending led to Congress cutting corn ethanol's subsidies.  But Congress did not bother to overturn the EPA's emissions targets.

Cattle farmers
Cattle farmers fear they could go under if corn prices stay artificially high. [Image Source: Texas Vox]

While cutting the subsidy, but leaving the quota might seem like adding insult to injury, corn producers were actually happy (mostly) that the quota remained.  The quota created higher artificial demand, driving up prices.  That artificially elevated demand has helped the corn industry weather the recent droughts, as corn prices have risen 60 percent.  

But while that may have saved big corn's profits in a year which otherwise would have been disastrous, the damage has essentially been passed along to livestock producers.  

Mike Deering, a spokesman for the National Cattlemen's Beef Association, says his organization has pleaded with the EPA to temporarily cut targets to alleviate already drought elevated corn prices made even higher by artificial ethanol demand.  He comments to ABC News, "Our ears are open and the line of communications is open, [but] we do not have any definitive news at this point and time."

III. Trading Higher Food Prices for Votes

Perhaps this is a case of reaping what you sow, but amid pleas from livestock farmers there's not a drop of relief in sight.  The issue lies with how the EISA is structured.

While the EPA has the power to temporarily reduce production quotas, it must receive that request from states or ethanol refiners.  An ethanol trade group -- the Renewable Fuels Association -- said it "wouldn't be surprised" to see such a request, but none has come yet.  The issue is that corn demand actually helps corn farmers, refiners, and corn-producing states.

Currently about a third of corn is used to make ethanol, another third goes to livestock feed, and the remaining third is sent for human consumption either as a vegetable or in various food additives (corn syrup, corn starch, etc.).

The cattle industry warns, "The drought-induced reductions in the corn supply means that the mandated utilization of corn for renewable fuels will so reduce the supply of corn and increase its price that livestock and poultry producers will be forced to reduce the size of their herds and flocks, causing some to go out of business and jobs to be lost."

One problem is that supporting corn ethanol has held the key to Presidents Bush and Obama wining crucial swing-state battlegrounds.  

In 2008 President Obama won three of the four largest corn producing state -- Iowa, Minnesota, and Illinois.  He also won other swing states with large corn growing regions, including Michigan, Ohio, and Wisconsin.  Support of ethanol earned President Obama and other regional politicians key support -- both financial and in votes.  Unsurprisingly politicians in these regions and the President are key supporters of corn ethanol.

Electoral college 2008
Corn ethanol supporters were key to President Obama winning battleground states in 2008.
[Image Source: Wikimedia Commons]

Meanwhile the states who are hurt the most by the quotas -- livestock states like Texas -- are regions where President Obama holds little hope of winning electoral votes.

Of course, there is a risk that supporting government inflation of corn prices could backfire.  Outside of corn producing states who directly benefit from higher corn prices, voters in other swing states might look to punish President Obama and the backers of big corn if failing livestock and higher food corn prices could drive up costs of meat and many dry foods.

For now, though, the quota stands.

Source: ABC

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corn ethanol
By Argon18 on 8/3/2012 7:18:37 PM , Rating: 5
corn ethanol is a financial, environmental, and automotive disaster. takes more energy to make than what it contains, and corn is one of the absolute most pesticide and fertilizer intensive crops. it's irresponsible and it's disgusting.

RE: corn ethanol
By m51 on 8/3/2012 7:56:54 PM , Rating: 5
The intensive tilling involved also causes a very high top soil erosion rate which means a rapid loss rate of viable farm lands. We're trading our ability to grow food in the future for quick profits for ConAgra and ADM today. It's also depleting the fresh water tables from the enormous fresh water demands exceeding supplies.

It's an impressive bit of political lobbying that even though everyone is aware of the costs to the tax payers in the 10's of billions of dollars a year and zero benefits that nobody is able to get rid of it.

They are old masters at the political game though. The check for the slush funds that funded Nixon's Watergate break in was provided by none other than the CEO of ADM at the time.

RE: corn ethanol
By dgingerich on 8/3/12, Rating: 0
RE: corn ethanol
By Ringold on 8/3/2012 8:52:50 PM , Rating: 4
The birth rate is a whole different issue. Economists don't talk about it much, but demographics pretty much means economists don't know how Japan, for example, can survive as a nation. Similar problem for Russia. Europe as a whole will be saved only by looking more like North Africa, as native Europeans typically have rock-bottom fertility rates, offset only by immigration.

Economies can handle a stable population level, but like deflation, economies, much like nature, tends to fall apart in a shrinking world.

Heck, it's not hard either to extrapolate when the last South Korean or Japanese baby will be born. You've been bit by the extreme leftist bug that's been around since the 60s that instills this idea that humanity is plague upon the universe and should remove itself from existence.

Besides, your facts must be wrong somewhere, because somehow the number of acres under the plow this year was the highest since the 40s.

RE: corn ethanol
By Jeffk464 on 8/3/12, Rating: -1
RE: corn ethanol
By Ringold on 8/3/2012 9:06:49 PM , Rating: 4
That's a hold-over from Malthusian thought, a school of economic thought dead and abandoned by all but Marxists for at least 2 centuries.

We're scarcely constrained by resources as it is. People are hungry due to government failure, not a lack of food; there's more then enough to go around, but corrupt autocrats are more interested in lining their own pockets and that of their camel-humping clan then improving the lot of their nations. More and more 'resources' consumed are in services, technology and media, areas essentially unlimited in nature. And recycling technology advances, year in and year out. Meanwhile, more and more iron, copper and other reserves are found, existing mines keep going, and ways to exploit aging mines further are devised.

Even in agriculture, the green revolution has scarcely touched Africa. There's been, compared to Europe and North and South America, almost no research on how to optimize yields there, given local soils and weather. Very little advanced seed used, very little GM seed. Africa could, very easily, by just deploying best practices and a little more technology, quadruple their yields.

The next frontier is starting to open up as well, as SpaceX proves on an almost monthly basis. People aren't laughing at commercial space any more, so by one famous estimate we might be 50 years from a space elevator now. With a thousand years or more of easily accessible nuclear fuel, then if we haven't moved past this little planet then its no ones fault but our own.

No, the only places we are resource-constrained are in areas where we place artificial limits on ourselves. Europe has high natural gas prices, but several countries ban fracking entirely, for example.

RE: corn ethanol
By Jeffk464 on 8/3/12, Rating: -1
RE: corn ethanol
By Ammohunt on 8/3/2012 9:56:27 PM , Rating: 2
Tell that to the dry land farmers that settled the area on the edge of the pawnee national grasslands where i live. Its a green oasis in an otherwise semi-arid desert.

RE: corn ethanol
By Ringold on 8/4/2012 6:27:00 PM , Rating: 5
Also tell that to Brazil. Most people did, thought Brazil's soil largely too acidic or otherwise lacking to be arable.

Surprise! Brazil applied a little research, a little elbow grease, and now Brazil is an agricultural king-pin.

Obviously desert will never be easily productive farmland, of course. No one would suggest so. But that's only a portion of North Africa. Zimbabwe, before losing is fraking mind, was the breadbasket of Africa. Now it's reduced to subsistence farming, at best. It could very easily be a massive exporter, as could almost all of its neighbors.

I'm sorry, but there's zero evidence of Malthusian resource limitations being anywhere close around the world. Even the most dire shortage, water, is one largely government-created; governments tend to massively underprice the cost of water, leading to wasteful usage, damaging ways of getting it, and disregard for reclamation. Food, again, is a governance problem. Other raw material prices are up this decade, but its remarkable not in how much they've risen but in how little they have considering 2 BILLION people are working on joining a global middle class.

RE: corn ethanol
By Paj on 8/6/12, Rating: -1
RE: corn ethanol
By spamreader1 on 8/6/2012 9:38:54 AM , Rating: 1
You're on to something there. On the research on optimizing yields in Africa, there has been quite a bit. The major problem with common staple crop yields in Africa is the climate. They have 2 seasons, wet and dry. The crops that produce so well for climates outside the tropics don't produce very well at all in most of these regions.

The research needs to focus more on what does grow well in that area and how it can be safely brought to larger scale. (Water is already at a premium so contamination of that resource would be disasterous.)

RE: corn ethanol
By Jeffk464 on 8/3/2012 9:03:58 PM , Rating: 1
If you study your history you will understand that during good time societies have exploded population wise and then hit with things like droughts or like Europe's Little Ice Age you have a large die off of population. Being global has helped a little with this problem as you can move grains from one area doing well to another area in drought but as you stretch resources more you might not be able to cope. China used to be plagued by this problem and Africa still is.

RE: corn ethanol
By Ringold on 8/3/2012 9:11:00 PM , Rating: 2
Yes, that was true, but if you study history and draw logical inferences, you'll notice the connection between the ancient pre-historical world, ancient China, and modern Africa. And what is that? Zero innovation and technological advance.

Malthusian economic theory perfectly describes a world, but only one with zero productivity growth, and one that ignores the demographic trend where, as people become wealthier, they seem to realize they don't need a whole herd of babies to support them (both because they're better off themselves and because 3/4 wont die), and fertility rates tend towards ~2. In short, Malthus doesn't describe the real world at all, only the world prior to the Enlightenment, basically.

RE: corn ethanol
By Jeffk464 on 8/3/12, Rating: 0
RE: corn ethanol
By knutjb on 8/3/2012 10:37:13 PM , Rating: 3
You are making the same mistake Malthus made. You are ignoring improvements in crop yields and the manpower required to produce it. There are machines that plant seeds without the need for tilling. Our problem is Obama wants E15. The corn used for ethanol is the same variety used for animal feed. The world has not had a food supply problem, starvation is linked to war as the primary cause.

RE: corn ethanol
By espaghetti on 8/3/12, Rating: 0
RE: corn ethanol
By FaaR on 8/4/2012 8:22:38 AM , Rating: 1
You were doing fine until you started gibbering about "lazy and stupid people", fascist.

RE: corn ethanol
By Stiggalicious on 8/5/2012 4:30:44 PM , Rating: 1
Not knocking your arguments, I do agree with you, but I must mention that most corn plating nowadays is done without tilling or digging. They simply insert the seeds straight into the ground at the proper height. This helps tremendously to reduce/eliminate topsoil erosion and drastically reduce water consumption.

RE: corn ethanol
By TSS on 8/3/2012 8:13:46 PM , Rating: 2
Growing anything for fuel is just downright insane. Even if there's litteraly nothing to grow on a piece of land you can use it for a structure or just return it to nature. To take nutrients from the soil and burn them is just....

Well let's just say everybody who lived and died before say 1945 is turning in their grave. How rare it is and how foolishly we use it. Not to mention what we do to the soil to sustain this level of production.

RE: corn ethanol
By lennylim on 8/3/2012 8:27:43 PM , Rating: 1
> Growing anything for fuel is just downright insane

You mean, like firewood?

Actually, it may make sense in some situations. For example, switchgrass :

RE: corn ethanol
By Ringold on 8/3/2012 8:53:55 PM , Rating: 3
Sure, it might in some situations, but the politicians aren't pushing that, now are they? They're pushing corn.

RE: corn ethanol
By Jeffk464 on 8/3/2012 8:54:33 PM , Rating: 3
Sugar cane to ethanol is actually productive.

RE: corn ethanol
By Stevethewalrus on 8/3/2012 9:17:48 PM , Rating: 1
Ya, but it can't really be grown in the U.S.

RE: corn ethanol
By Jeffk464 on 8/3/2012 9:26:12 PM , Rating: 1
Speak for yourself howlie. :)

RE: corn ethanol
By Solandri on 8/4/2012 2:06:22 PM , Rating: 2
Sugar beets, however, can.

Also, the only reason sugar cane and sugar beets are preferable is because they're storing solar energy in relatively short sugar molecules. Most plants take the extra step of converting the sugars to cellulose (virtually all plant matter) - a bunch of sugar molecules glued together to form a longer molecule. If we can figure out a cost-effective way to break those molecules apart back into the shorter sugar molecules*, then any plant matter can be converted to alcohol fuels - including the waste 2x4s from demolishing old buildings.

* That's what the bacteria in termite guts do. The termites eat wood, the bacteria break the long chains into shorter sugars, and the termites digest the sugars.

RE: corn ethanol
By The0ne on 8/6/2012 4:26:38 PM , Rating: 2
My Family grows sugar cane all the time here in San Diego. For small scale I know it's viable. For mass scale, i've no idea :D

RE: corn ethanol
By knutjb on 8/3/2012 10:07:30 PM , Rating: 2
Actually, it may make sense in some situations. For example, switchgrass
Great choice of vaporware. That is the stuff the EPA is fining companies for not using. Does it matter that you can't buy it anywhere?

RE: corn ethanol
By knutjb on 8/3/2012 10:09:40 PM , Rating: 2
Actually, it may make sense in some situations. For example, switchgrass :
Oh yeah the fantasy fuel the EPA is fining companies for not buying even though you cannot buy it commercially.

RE: corn ethanol
By knutjb on 8/3/2012 10:11:40 PM , Rating: 2
Sorry for the dbl post. TW connection issues.

RE: corn ethanol
By SpartanJet on 8/4/12, Rating: -1
RE: corn ethanol
By Ringold on 8/4/2012 6:30:46 PM , Rating: 2
It links to decent sources, including the WSJ.

RE: corn ethanol
By knutjb on 8/5/2012 5:00:07 PM , Rating: 4
I simply grab the first one off the search engine because I had heard the same coverage on several different sourced radio news stories. So if you love your blinders try this:

As to your BS comments; those on the left vandalized Chick-fil-A in their protests:

I picked a source that seams closer to your beliefs. You very rarely find conservatives committing violence to prove their point and those who do are quickly condemned for doing so. I never saw a story where Tea Party events, no I'm not a member, committed violence or even left a mess behind.

Unfortunately we see violence and intimidation becoming increasingly common from those on the left, again. Those who do use violence are rarely condemned and usually touted in an idyllic way like the Occupy movement. Back to the future, i.e. 60s-70s Ah the good ol days...

RE: corn ethanol
By Rukkian on 8/6/12, Rating: 0
RE: corn ethanol
By TSS on 8/5/2012 8:56:32 AM , Rating: 2
Yeah like firewood. Go tell everybody who has central heating now to turn it off and resort to firewood for heat. Let's see how long those trees last. After that you can convert all ICE cars to steam engines to aggrivate the problem. And convert all houses in the world back to wood instead of concrete. Trees only work as a renewable source now because demand for trees per person is really low.

I'll repeat, growing anything for fuel is insane. The food chain is a closed cycle. You break that cycle when you start burning stuff. No matter is lost but it is transformed, and the products of using crops as fuel cannot be used by life to recycle back into the food chain to support other life. On a small scale, this doesn't matter. On a national or planetary scale, it certainly matters.

Look at it from another way: the land right now is already overfarmed. Brazil is the only one who manages to pull it off and they've cut down 1/4th of the entire rain forest since 1970. They took out an area the size of greece *last year*, the lowest it's been in decades.

Now look at the US. Alot of land is already in poor shape from overfarming, using oil based fertilizers to boost production for export. They're great for turning land that's already arid into farmable land, but they've also been used on fertile land to increase production and overfarm it for export. That makes fertile land arid. So far i've heard great things about solar, wind, nuclear, electric, fusion and whatnot. I haven't heard a peep about replacing oil based fertilizers or what it would do to crop production.

But then again like Jim Rogers says, the average farmer age in the US is 58, with similar numbers across the world. Nobody gives a damn about farming anymore.

RE: corn ethanol
By Jeffk464 on 8/3/2012 8:53:59 PM , Rating: 2
Can we stop with the corn based ethanol already. Nobody but the corn lobby thinks its a good idea. The oil companies don't like it, the environmentalists don't like it, and it just doesn't make energy sense. Brazil can do it with sugar cane because the energy in to energy out is like 1:7 for corn its like 1:1.7 If they ever come up with a good way to turn the corn stocks into ethanol then I'll change my mind.

PS - it also raises the cost of grain exports to places like africa where they already can't afford to eat.

RE: corn ethanol
By Ringold on 8/3/2012 8:58:28 PM , Rating: 3
Environmentalists DID love it, and thats how we got in this mess. The left, being bleeding hearts and naive, jumped in bed and combined forces with the oldest, most savvy and brutal lobby that's probably ever existed in the country, the farm lobby. Once they did that, the farmers took the reigns and used the extra influence the way they wanted. Traditionally conservative farmers and greens on the same side of an issue? A politically unstoppable force.

Environmentalists must know now what it feels like to be used for a one night stand and told to GTFO the next morning without so much as a cup of coffee. At least they would if they were paying attention, they tend to forget their own mistakes and failures almost as soon as they happen.

RE: corn ethanol
By Jeffk464 on 8/3/2012 9:08:34 PM , Rating: 2
I agree 100%, you have to remember a lot of environmentalist aren't that well informed. Like global warming and other issues you really need to go with the research/scientists. Basically consider the source whether its just some 21 year old hippie college chick or Rush Limbaugh.

RE: corn ethanol
By PaFromFL on 8/4/2012 8:22:40 AM , Rating: 2
For the three cars I've tested on long trips, the gas mileage dropped by about 10% when using E10 vs pure gasoline. When you factor in the oil used for ethanol production and transportation, E10 actually increases our consumption of oil. It's time to ban the use of ethanol in fuel and starting sending corn lobbyists and their bosses to Guantanamo, as lessons to other greedy pigs.

RE: corn ethanol
By MethylONE on 8/4/12, Rating: -1
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