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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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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.

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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