Ethanol And Hunger

Investors Business Daily (IBD) ^ | April 11, 2008 | Staff

[KamperKen]

“The oil price will drop because we will use less oil if we aren’t using it to farm and distill ethanol. “

I have seen a study cited several times now that says it takes 1.3 barrels of oil to make the ethanol energy equivalent of one barrel of oil.

The subsidies, as they always do, are distorting the markets, and should be done away with.

[hubel458]

We have all seen that study and it is crappy lies.
No ethanol plant uses oil to run boilers. And
they don’t take into account the other products
from the corn processing, they throw in the rainwater
falling on the land and figure it needing energy like
irrigation. They talk about price supports when there
isn’t any on corn. And hasn’t been for couple years.
There is only a tax credit for BIG OIL to use
ethanol and it is a fraction of what price supports were.
And Dan’s mis-information about oxygenates
helping emissions, not aiding clean air is a lie.
Ethanol in gas works, for 40 years ago you couldn’t
see a 2 miles across Detroit for smog, and now it
is nearly as good as we have it here in central
Michigan. Oxygenates and other things they’ve done
works. Our larger engine vehicles run better on it.

The price of food is due to speculators driving it up
using every scare and excuse to do so, one being
articles like this, others like weather reports saying
we will have floods, we will have droughts, we won’t
have enough acres to plant, ad nauseum.It’s silly.
Why don’t they bitch at BIG OIL for not putting all
the oil they get into fuel. Well Oil Com can’t as
they have byproducts like asphalt. Well ethanol is
just another by-product of processing of farm
commodities. Like corn products are being used to
make biodegradable plastic bags, soy products are
used in making plastics, other farm products are
used by hunters to feed deer and other game,
and so on.Ed

[KamperKen]

I cannot fault your logic or your facts since your post was devoid of both.

Given a choice, I choose “Big Oil” over you. Your uninformed rants don’t power my car or any other vehicle, or generate electricity or fertilize crops. Even at these prices, Big Oil is infinitely more valuable than you are, since any number, divided the zero that represents your worth, is infinite.

[Dan Evans]

I have seen a study cited several times now that says it takes 1.3 barrels of oil to make the ethanol energy equivalent of one barrel of oil.

I've about half a dozen of these studies and they are all over the map. Government studies show a positive yield and a few independent studies show a net loss of energy.

Farm lobbyists and ethanol producers have an incentive to lie about this for obvious reasons. Politicians have an incentive to lie because they just love all that power (will we have an "ethanol czar"?) Even oil companies profit from an fuel source that uses more oil than fuel produced.

Does the taxpayer even have a chance?

[Balding_Eagle]

I don’t remember just how that all went, I just remember getting the rug pulled out from under me and everyone else.

I had only a passing interest in politics at the time.

[poinq]

It doesn'. World hunger is a problem of economy an logistics. How do you get the right food to the right people without killing the little farmer or local food store owner at the same time. The reality is that we have enough food to feed the world even if we have another few billion people. We are not trying to produce all the food we can now.

If you see starving people they are people who cannot do the actions required to get to a steady food source. Its not that a food source does not exist. Mental Illness, culture, war, dictatorial controls cause hunger, not lack of food.

[Dan Evans]

Nothing wrong with sucking the government teat if the calf grows up nice and strong and independent and gives more milk than it sucked from the teat.

Trouble is, our calves are rarely weaned.

There is another way of nurturing fledgling industry and that is with private investors. Millions of people risked a lot of money bringing computers, Internet technology, airplanes, cell phones and pharmaceutical companies to the market.

Trying to portray government as the founder of these industries is an insult to the visionaries and venture capitalists who really made it happen. It is an insult because it implies that good people need to be prodded and they would not have the invention, industry or will to do good things on their own.

As I said before, one of the problems with government spending is that it gives a precedent, however feeble, for more government largess with hard-earned taxpayer money.

When the army bought an airplane from the Wright brothers for a legitimate military purpose that can hardly be compared to a huge byzantine system of subsidies, mandates, tax benefits and price supports for ethanol.

Look at other countries for examples of the "calves" that were supposed to grow up. Like, for example, phone companies. In the early days of the cell phone, many counties had more cell phone owners than in the US. Why? Because the old land-line phone companies were old and bloated calves still sucking off the government and enjoying their monopoly status. Cell phones provided better service.

Long ago, when federal government taxes were in the single digits, research was funded privately. They were wealthy men called "patrons" who funded scientists. Many great discoveries in the pure sciences were made this way. Today wealthy men are treated like cash cows by the government. The wealthiest 50 percent of taxpayers pay 96 percent of the tax burden, about 40 percent of GDP. Imagine how much better this country would work if they didn't have to pay that money to a system that doles it out to the most corrupt researchers doing junk science. Not honest scientists but zombie-like drones who got their position from political patronage, affirmative action or just plain dishonesty.

[Balding_Eagle]

Yes, the market, and especially the futures markets plays a big part.

But, here’s the governments control on all this, and there are two big components:

First, surpluses. The Farm Program is calculated to produce surpluses every year, and that’s usually easy to do, simply relax the controls a bit and the farmers will deliver enough grain to satisfy domestic use, exports, and extra grain in the bins throughout the year. The government even pays a subsidy to farmers to build storage, encouraging even more grain on hand.

That surplus hangs over the market like an evil specter, the storage subsidies are such that when certain trigger prices are reached, the grain goes on the market. That puts a ceiling on grain prices.

Those surpluses are a constant ogre for the farmer. Ask any farmer, even today, too large a (national) crop is one of the top five worries.

Second, the government controls how much land goes into production each year. You’ve heard the old gripe ‘yeah, those farmers......they get paid to NOT grow crops’. Well, there’s a lot of truth to that. Each spring the USDA builds the acreage allotments, and keeps refining them until the very last moment. Usually just a few weeks before planting the final revision comes out, the farmers scramble to adjust their own plans in light of the allotments and the crop is planted. Some ground may not get planted to anything.

In the 80’s the government was either brave, or desperate, depending on how you look at it, and put together a 10 year ‘set aside’ program to take cropland out of production for a 10 year period.

Another thing the program does is direct (through incentives and disincentives) what kind of crop is grown. Shortage of soybeans looming? Decrease the subsidies for planting corn, and maybe even throw in come sort of carrot for soybean acreage, such as a higher payment for set aside land if the corn/soybean acreage ration on that farm is just right. Presto! More soybeans, less corn harvested!

BUT guess what? BOTH crops have a large surplus. So, what to do? Exports, but, not too much, as we need to make sure we have enough. Enough, as defined by; crop price low enough to keep food prices down.

Now, the obvious thing is to say to the farmer, get out! Get out of that program that has all these restrictions. Farm without the government as controlling partner. At one time it was possible, but now, with nearly every farmer in the program, the resulting prices are so ‘tight’ and close to the cost of production that if the individual farmer has a short crop, and no government subsidy, he’s going to finish the year in the red.

With absolutely no hope of getting a high price for his next crop to make up this years red ink, and because the surpluses that are hanging over the market have been there for decades, and it’s unlikely they’ll go away(3 exceptions since 1960) he’s faced with what my father was finally faced with in the 60’s; enroll in the farm program, or declare bankruptcy. My father enrolled. Some chose bankruptcy. The lucky ones, like me, sell out.

[Dan Evans]

George Will once said that one of the perverse functions of our modern government is the "amelioration of pain". That's too bad because pain can be a good teacher if you are smart enough to learn and adapt from it.

I guess the farm program is one example pain amelioration. Another example is morphine. And morphine, like a government subsidy, is very addictive. After awhile, the addict gets no pleasure from the drug but he is still hooked because the withdrawal is very painful.

Someone had told me all these programs were being phased out. But I guess not.

[Balding_Eagle]

It will be interesting to see if these programs can withstand the forces of the current market. The bureaucrats are busy trying to figure out how they can still stay relevant.

[KamperKen]

Thanks for the additional info. I merely was mentioning that I had heard of one study that said corn-to-ethanol generated a net energy loss. I wasn’t aware of other such studies, their sources, the self-interest of the parties generating them or what the consensus of such studies might indicate.

My inclination is to conclude that anything government mandated has to make the problem worse.

[thackney]

Another study to consider concerning ethanol's energy input/output ratio is from the main source pushing it. Our government.

From the Alternative Fuels and Advanced Vehicles Data Center, sponsored by the U.S. Department of Energy, part of the Energy Efficiency and Renewable Energy Information Center they discuss the Energy Balance of Ethanol.

http://www.eere.energy.gov/afdc/fuels/ethanol_balance.html

Here you will find the following: Ethanol - The complete Energy Lifecycle Picture Brochure
http://www.eere.energy.gov/vehiclesandfuels/pdfs/program/ethanol_brochure_color.pdf

On the third page we find:
Total Btu Spent for One Btu Available at Fuel Pumps

You will see by their study more energy is put into creating the fuel, than the fuel contains itself.

This study was orignially created by Michael Wang, Ph.D. from the Center for Transportation Research/Argonne National Laboratory for the Corn Growers Association promoting ethanol.

Argonne expert addresses energy, environmental impacts of fuel ethanol
http://www.anl.gov/Media_Center/News/2005/news050823.html

[Swiss]

Department of Agriculture percent of the federal budget is about one half of one percent.

You obsess about .5 percent of the budget, I worry much more about Social Security and Medicare. I don’t know how old you are but are you planning to get Social Security and use Medicare?

[KamperKen]

Thanks for the information and the links. I was surprised to see it came from a government agency.

[hubel458]

All fuel and food comes from the sun’s energy.
If Wang did a calculation(and it’s been done
by others) on the amount of energy gotten out of
oil, compared to what the sun put into plant and animal
tissues as well as the heat to decompose them and make
oil, they’d find a lot less btus gotten out, compared to
what went in to make oil. It is a strawman issue.
We don’t get the energy out of out steak, compared to
what sun put into it. Are we to stop eating.

Swiss- And the biggest share of that .5% ag bill is
food stamps and conservation payments, most of
which active farmers don’t get.

A word to the two campers/kampers whatever.
It is obvious you don’t know shit from shinola about
farms and the uses farm products are put to.
My post told the truth about some uses that farm
products are used for. And why do you complain about
oil being used in ethanol plants, which it isn’t,
and not complain about oil powering oil refineries.
And your letting the big money powers, one of whom
wrote this article stampede you into your silly
reactions knowing that the controversy you are
joining in with will drive up farm commodities more,
helping them and speculating friends. You are
being use das stooges...for their dirty work.....Ed

[Dan Evans]

You obsess about .5 percent of the budget,

It's the thin edge of the wedge. People point to government handouts to justify more handouts. That's how we've gone from a federal government that spent 2.5 percent of GDP to spending 25 percent of GDP in 100 years. It's always the same argument. If you slice the budget salami thin enough you always have to argue against spending "only 1/2 of one percent of the budget".

I don’t know how old you are but are you planning to get Social Security and use Medicare?

No. Absolutely not. If I did that, if I took so much as a nickel from the government, how could I possibly answer to people who promote these idiot programs that require us to burn food? They would call me a hypocrite.

[Swiss]

Reminds me of something I read about the Great Chicago Fire of 1871. Back in that day there was a guy in charge of the county courthouse in Chicago. He was legendary in trying to save the taxpayer’s money. He would ration out the supply of paper clips for example.

Well O’Leary’s cow kicked over the lamp and soon the fire was headed for the courthouse. Workers and onlookers soon arrived to help move valuable stuff out of the courthouse. The guy in charge of the courthouse refused to let them do it. Why something would get stolen or broken and he wasn’t going make the taxpayers pay for that foolishness.

They left everything in the building from irreplaceable records to expensive furniture. The fire department tried to save it but soon it was engulfed in flames.

The social programs is like the Chicago Fire. Worrying about ethanol is like worrying about a bathtub overflowing on the Titanic.

Hell with the price of gasoline edging towards $4.00 I don’t see the need for ethanol subsidies but there is a lot more important things to worry about.

[Dan Evans]

We don’t get the energy out of out steak, compared to what sun put into it. Are we to stop eating.

No. See if we stopped eating we would die. If we stopped burning food, we would have more to eat.

...compared to what the sun put into plant and animal tissues as well as the heat to decompose them and make oil, they’d find a lot less btus gotten out, compared to what went in to make oil.

But the sun is free so it doesn't matter how much went into making the oil. But the coal and oil used to make ethanol has to mined and be paid for.

The whole issue here is that, in a free market, we wouldn't need to do these calculations or have this argument. You could just make the ethanol and offer it on the market. Then you would either make a profit or go broke. We would not have to do all these studies to determine if it was "energy positive" or economical. We wouldn't have to debate it or vote on it because the market becomes the calculator. You either go broke or not.

[Dan Evans]

The social programs is like the Chicago Fire.

You got that part right. Social programs, like fires, are hard to fight once they are started. Sometimes the best you can do is contain them and keep them from spreading.

Worrying about ethanol is like worrying about a bathtub overflowing on the Titanic.

Tell that to the people who are suffering from food riots and can't afford to buy bread in third world countries.

Hell with the price of gasoline edging towards $4.00 I don’t see the need for ethanol subsidies

No, you don't need subsidies if you get your greasy politician friends to mandate more ethanol use. It's like having a bunch of blank checks on the taxpayer's account.

[Balding_Eagle]

Some observations, my comments mainly covered the period prior to the recent run-up in grain prices.

Most farmers I know are ecstatic that they are no longer dependant on the USDA for even a portion of their income. How long that will last is difficult to tell, but for now they are enjoying a freedom that they haven’t had since WWII, and for most of them, until now, they had to ask Grandpa what is was like to be free. They aren’t going back easily.

It seems to be the consumer who is the one who is suffering the withdrawal symptoms you referenced. I think none of them, as judged by the posts here at FR, thought that the transition to government free farming would be so traumatic for them personally, and so freeing for the farmer.

By way ov evidence that ethanol has little to nothing to do with the current grain prices, see this: “Rice prices hit the $1,000-a-tonne level for the first time on Thursday as panicking importers scrambled to secure supplies, exacerbating the tightness already provoked by export restrictions in Vietnam, India, Egypt, China and Cambodia.” http://www.ft.com/cms/s/f21969fe-0ca5-11dd-86df-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ff21969fe-0ca5-11dd-86df-0000779fd2ac.html%3Fnclick_check%3D1&_i_referer=&nclick_check=1

The recent price spike is world wide, and has very little to do with ethanol. ( I do know that not a single non-farmer here believes that, but time will prove that to be correct)

I think consumers can finally breath a sigh of relief, the market has adjusted food prices to a point that the American farmer will no longer needs the government. Their wish has been fulfilled.

Yes, there is some sarcasm in that last sentence.