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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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Everyone is wrong
By Carney on 8/6/2012 4:32:42 PM , Rating: 2
As Ronald Reagan said, it's not what folks don't know, it's what they "know" that isn't so.

On ethanol, everyone's parroting the same sets of truthy factoids they have been spoon-fed from trusted media outlets and think tanks. It's no accident. Ethanol has been subjected to an incredible bombardment of expensive propaganda, with tested memes targeted at both the right ("it's socialism!") and the left ("it's not green!") and both ("it's corporate welfare!").

And no wonder - as even the anti-ethanol Wall Street Journal was forced to admit when it published a Merrill Lynch study, ethanol prevented oil from rising even higher during the 2008 oil price spike, saving Americans (and costing OPEC) more than $100 billion. Well worth it, then, for the foreign regime-run oil cartel to respond with a massive lie and FUD campaign. Focus group memes via high priced PR firms and political consulting firms, then feed the lies into this think tank, which then feeds it to various media outlets and politicians, and then it becomes conventional wisdom.

Among the nonsense and proven falsehoods are:

"Ethanol reduces food supplies and starves kids!"

Complete nonsense. Even while ethanol corn production has gone up dramatically, food corn production IS UP AS WELL. Scary sounding stats like 40% of our corn crop being "diverted" to ethanol carefully ignore the reality that the overall total of corn produced is higher, enabling more food corn to be produced than ever. Less than half our farmland is even cultivated, and only a fraction of that is used for ethanol. Per acre crop yields rise constantly, up more than 17% since 2003 alone.

Yes, sometimes commodity prices go up and down in the market, due to the business cycle and weather conditions and such. Instead of panicking and commiting suicide by destroying the biggest and most impotrant alternative to jihad juice, we should THINK about the long run and realize that corn prices (as well as those of other ag commidities) will come back down again, and meanwhile it's incredibly stupid to choose to be a helpless captive market of OPEC.

"Ethanol takes more energy to make than it yields!"

If that were true the market retail cost of ethanol would be way out of reach. Instead it's within the ballpark of gasoline even when subsidies are removed and adjusted for mileage, not eyebrow-raising when its high octane, higher than premium gsoline, is taken into account.

The energy return on investment for ethanol is studied to death, and has been overwhelmingly proven to be positive, about 25-30%. The most prestitigious peer-reviewed scientific journal in the world is Science (along with Nature), and in 2006 it published a comprhensive review of the ENTIRE existing body of peer-reviewed research on the subject. The conclusion was inescapable - again, 30%. And in the MUCH more geo-strategically important measure of oil (not all energy, just oil) in vs ethanol out, you get at least ten and even 20 units of ethanol per unit of oil needed to make it.

"Ethanol costs us a fortune!"

Wrong. Total government intervention for ethanol, including tax breaks, totaled less than $10 billion yer year at most. Meanwhile OPEC took oil from $10 a barrel in 1999 to $140 in 2008, and since we must import 5 billion barrels a year that means we went from spending $50 billion a year to $700 billion, a NEW, foreign-imposed "tax" of $650 billion on the USA, or more than $8,000 per family of 4 when average income is about $45K, and after-tax income is $35K. Any wonder why big-ticket items such as cars and houses saw their sales dry up, and why the auto, real estate, and financial industries collapsed, taking the economy with them? And you're still whining about the piddly less than $10 billion we spent on ethanol, which saved us more than $100 billion in oil?

RE: Everyone is wrong
By 96suzuki on 8/6/2012 10:35:54 PM , Rating: 2
Lets see.... I'm OK everyone else is not OK...

As Ronald Reagan said, it's not what folks don't know, it's what they "know" that isn't so.

Its more like... As Ronald Reagan said, it's not what folks don't know, it's what we don't want them to "know".

Ethanol reduces food supplies and starves kids!

OK I agree while it doesn't starve kids it has hurt the live stock farmers and in return gets passed on to us and has raised the prices of just about every product on the market. You would be surprised how many products are made from corn. 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.

Ethanol takes more energy to make than it yields!

"1 acre of corn yields 7,110 pounds of corn to process 328 gallons of Ethanol. However, planting, growing and harvesting that much corn requires about 140 gallons of fossil fuels and costs $347 per acre. "
Doesnt look so good to me....

With only 2/3 the energy of gasoline, ethanol costs more per mile, Example:

The energy of ethanol relative to gasoline
A. 76,000 = BTU of energy in a gallon of ethanol
B. 116,090 = BTU of energy in a gallon of gasoline
C. .655 = 2/3 = GGE of energy in a gallon of ethanol. A / B. (GGE =energy in a gal. of gas)
D. 1.53 = Gallons of ethanol with the energy of 1 gallon of gasoline. D = B / A.

Ethanol Fails to Lower Gas Prices, Study Finds

In fact Ethanol increases the foreign oil dependency due to the fact that it decreases fuel economy in return we use more gasoline by filling up more often.

E10 (also called “gasohol”) is a blend of 10% ethanol and 90% gasoline sold in many parts of the country. All auto manufacturers approve the use of blends of 10% ethanol or less in their gasoline vehicles. However, vehicles will typically go 3–4% fewer miles per gallon on E10 than on straight gasoline. And of course with a higher ethanol content the less fuel economy you get.

Ethanol costs us a fortune!

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 .

If you don't think that's a fortune...You must be very rich....

"So if you want to save the planet, feel free to drive your Hummer. Just avoid the drive thru line at McDonalds." -- Michael Asher

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