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Corn farmers say "let the profits trickle down", while other farmers say quotas will kill jobs

There's a growing debate about what is put inside your fuel pump.  At the heart of the debate is a two-carbon alcohol -- ethanol.  This little fuel is creating a huge debate, which has divided the farming industry and raised perennial questions regarding the cancerous influence of special interest on the U.S. federal government.

I. Big Corn Makes Friends

When it comes to corn ethanol the message from Congress is clear: cut down on the ethanol production.  But the U.S. Environmental Protection Agency (EPA) is still waffling on whether to keep its strict quotas, or to "temporarily" relax them, after the worst drought in decades hit parts of the U.S.

With the drought hurting corn yields, farmers have been forced to compete with ethanol producers and the food industry for an insufficient supply.  Some farmers have, in their desperation, turned to feeding their cows candy, as cast-off bulk sprinkles are cheaper than the traditional corn feed.

The EPA's holds a tight grip on the amount of corn going into ethanol, thanks to its ability to regulate fuel in the U.S.  Under The Energy Policy Act of 2005 (often referred to as the Renewable Fuel Standard), which passed under President George W. Bush, fuel blenders are required to incorporate a certain amount of ethanol into gasoline blends at the pump, with the amount being bumped a little bit each year.

pumping fuel
The U.S. government mandates ethanol be blended into gasoline, to create artificial demand for corn. [Image Source: Nation Corn Growers Assoc.]

Studies have suggested that going from the corn-field to fuel pump corn ethanol is an energy negative process, consuming more energy than it produces, and offering up higher life-cycle carbon emissions that standard gasoline.  Further, automakers say gasoline-ethanol blends can harm traditional engines and deliver worse gas mileage than pure gasoline.  So the compelling question has long been why did the U.S. jump so deep into corn ethanol, and in doing so "accidentally" drive food and livestock feed prices upward.

In Congress' case, it appeared to be largely special interests.  Senators and representatives from corn farming-heavy districts/states accepted funding from farmers to help them get elected, and in turn pushed for the seemingly illogical ethanol blending requirements, which create artificial demand, driving corn prices up.  They also for some time passed billions in subsidies along to big corn farmers.

As recently as last year some senators -- Senators Tom Harkin (D-Iowa); Tim Johnson (D-South Dakota); Amy Klobuchar (D/"Farmer-Labor Party"- Minnesota); and Al Franken (D/"Farmer-Labor Party"-Minnesota) -- proposed increasing ethanol quotas via the trickily worded Biofuels Expansion Act of 2011.

II. Drought, Spending Cuts Threaten Corn Special Interests

But the ethanol special interests saw their grasp on Congress weakening last year amid the partisan rancor regarding the budget.  In a battle by each side to preserve their special interests, corn found themselves too short on the special interests pecking order to convince Congress at large to continue to vote for bloated subsidies.

In the aftermath, the subsidies were slashed, and then eliminated altogether.  Republicans in Congress also banded together to block the EPA's plan to increase ethanol blending to 15 percent nationwide, although the EPA found a way to sneak around that restriction.

But even the EPA -- who seemed firm on its ethanol commitment -- has started to show signs of doubt after an entirely external, non-political influence hit -- the drought.  The record drought is essentially forcing the EPA's hand, by creating corn shortages and hence amplifying corn ethanol's already undesirable price effects.

The EPA announced it would make its decision [PDF] about a potential waiver on blending requirements early next month.

Amid a record drought either the quota or jobs will be lost, say many farmers.
[Image Source: AP]

Eight state governors and 200 members of Congress have written a letter (on behalf of the slightly ironically named National Pork Producers Council) to the EPA pleading with it to relax blending rules via a waiver, at least for the rest of the year.  Delaware and Maryland's governors write that without a waiver the EPA would be creating "the loss of thousands jobs."

A number or researchers also signed a letter calling for a waiver.  Among them is John M. DeCicco and Ivette Perfecto from the University of Michigan School of Natural Resources and Environment.  They write, "The (Renewable Fuel Standard) diverts potential food crops to produce fuel, which drives up food price volatility and global food prices."

III. Big Corn Farmers Argue Higher Prices are Good for Everyone

Corn farmers are opposed to the idea, which would reduce the artificial demand that they currently enjoy.  The National Corn Growers Association essentially admits that it's acting out of greed, but making the argument that higher revenue from corn farmers stimulates the economy in a trickle-down effect.  They point out that corn farmers' revenue rose from $63B USD to $90B USD between 2007 and 2012.

They comment [PDF], "Higher feed prices are only one piece of a complicated economic puzzle... [a waiver would cause] severe harm to the economy."

corn profits
Big corn argues that its profits are worth more than whatever job savings might be realized by quota cuts. [Image Source:]

Before the drought corn prices had increased nearly four-fold from 2007 levels.  The fuel supply industry was set to (by EPA requirement) deliver 15.2 billion gallons of corn ethanol this year -- up from 5 billion gallons in 2007.

But the payday for big corn may soon be over.  After all, the Obama administration has a relatively substantial degree of control over the EPA -- a federal agency -- and it may be wary of refusing the waiver request, lest it trigger the predicted job loss and hurt the President' reelection prospects.

Sources: Detroit News, NPCC, Nation Corn Growers Assoc., EPA

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RE: Bad idea
By corduroygt on 10/12/2012 6:32:39 PM , Rating: 3
I was under the impression that we have enough land to plant crops without affecting the existing food situation. If that's not the case, we're better of researching algae.

RE: Bad idea
By Ringold on 10/12/2012 7:20:23 PM , Rating: 2
As long as the worlds billion-plus people in poverty are content eating the most basic and minimal of diets, you're right. But as their incomes rise, they've been aspiring to more Western, diverse, meat-rich diets. As that trend continues... We've probably got enough to arable land, but Africa especially has to boost yield, but Asia has some work to do too.

And then the population isn't going to plateau until 9 or 10 billion. That's a couple more billion people that'll aspire to occasional prime rib or rack of lamb.

A lot of loonies has been predicting apocalypse since the 70s. I think it'll work out fine, but we're not there yet.

So I agree on algae. Plus, the research seems to be pretty promising. There's just no vast, well-funded, politically connected American Association of Algae Farmers -- yet. :P

RE: Bad idea
By marvdmartian on 10/15/2012 12:15:56 PM , Rating: 1
The real problem is the conversion of cropland, which was previously used for growing other grains, to now grow corn, simply because of the (artificially) higher profit margin. This has, in effect, raised the prices of ALL grains, not just corn, which is why many of your food prices have gone up (since the animals which are fed those grains now have to have pricier feed).

Also, the USA used to export much of the corn that was grown, rather cheaply, to many of the lower income countries in the world. Just ask the Mexicans how they like losing out their inexpensive corn, which was a major staple of their diet, for decades?

The bottom line to this entire discussion is that the Congress took payoffs (disguised as "political contributions") from the farming lobbyists, to pass laws which made a bogus demand for their product, which has now artificially raised the price of that product.

The EPA has furthered that cause, likely under the direction of a president who has pushed the "green" initiative, without caring to contemplate the effects that it could have on the population. The only way we're going to get out of this mess is to replace these politicians with others who will vow to end this practice.

RE: Bad idea
By Jaybus on 10/15/2012 2:02:46 PM , Rating: 2
Wow! You want ethanol in your gasoline so badly that you would be willing to eat algae?

RE: Bad idea
By ppardee on 10/15/2012 4:15:15 PM , Rating: 2
Chances are REALLY good that you eat algae quite frequently and just don't know it. Agar and carrageenan are pretty much ubiquitous in processed foods and they are made from algae. There are tons more. And Japan eats lots of kelp just as it is, and kelp is an algae. Algae is one of the most useful plant groups on the planet.

But there has also been research into using it as a fuel source, which is probably what the other poster meant...

"This is from the It's a science website." -- Rush Limbaugh

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