Posted on 04/26/2008 4:19:44 PM PDT by CWW
BIOFUELS – A MAN MADE DISASTER
Unless you live as a hermit, you haven’t missed the rapid escalation of food prices caused by shortages in wheat, rice, corn and other grains. In many countries the price of rice has increased 70% since last year. As of February 2008, the cost of bakery flour had tripled from $14.60 per 100 lb bag in 2007 to $48.00 dollars per bag. U.S wheat production is at a 60 year low. Global wheat production is at a 30 year low. There have been riots in Haiti and Indonesia and threatened riots in other countries related to these shortages. So who is to blame? Look no further than Congress, misguided environmentalists and the law of unintended, albeit predictable, consequences.
The biofuel mandate policy of the United States (and other well-meaning, but economically ignorant, governments) has caused this looming disaster. Many economists saw it coming. And who wouldn’t. The U.S. government has adopted a food to fuel mandate that requires biofuels (ethanol and biodiesel) to replace 15% of our domestic fuel production within the next 10 years. That is a five-fold increase to 30 billion gallons of biofuel annually.
The current annual U.S. corn crop is 10 billion bushels, and each bushel of corn yields approximately 2.8 gallons of ethanol. You do the math. To meet the 15% mandate of 30 billion gallons of biofuel would require conversion of the entire U.S. corn crop. Although there are other potential sources for biofuel, such as saw grass, there is no current technology for colleting and delivering the product. So why don’t we use sugar beets and cane as a source for biofuels like Brazil? Because -- and here’s the kicker -- Congress subsidized farmers to grow corn by paying oil companies a 52 cents per gallon subsidy to blend biofuels with gasoline. Not surprisingly, farmers are plowing under their wheat and other grain fields to meet the demand.
The use of sugar beets and cane has been proven to be a more efficient crop for biofuel production. The Brazilians have been successfully producing biofuel from those crops for over a decade. So why can’t we import the less expensive, more efficiently produced biofuel from Brazil? Because agribusiness and farmers have literally bet the farm on ethanol by spending its capital to grow corn and build ethanol plants. They are not about to let Congress kill the goose that laid the golden egg. Hence, in addition to the 52 cent subsidy, a compliant Congress has placed a steep tariff on -- you guessed it -- the importation or biofuels from Brazil. Isn’t our government wonderful?
But it gets better. For you greenies out there, contrary to popular belief, the production of biofuels is extremely unfriendly to the environment. The increased use of fertilizer needed to support the growing corn crop has resulted in additional soil and water pollution. The National Academy of Sciences recently reported that the 15% food to fuel mandate will increase the size of the Gulf of Mexico dead zone by 10 to 19% as a result of water pollution caused by fertilizer runoff. Moreover, production of ethanol requires copious amounts of water, thereby draining local water tables.
Congress never learns. Manipulating the market with subsidies and taxation can have disastrous, and in the case potentially deadly, results. This escalating disaster can be reversed by dropping the import tariff on Brazilian ethanol and by ending the 52 cent per gallon subsidy to oil companies. If ethanol is such a great product, then it will thrive in the free market. How many people will have to starve before Congress and the do-gooder environmentalist lobby admit that our biofuel policy is a complete disaster and a potential threat to our economy and global stability.
The average person is woefully ignorant when it comes to economics and the underlying value of the commodities when it comes to retail food prices.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
How many people will have to starve before Congress and the do-gooder environmentalist lobby admit that our biofuel policy is a complete disaster and a potential threat to our economy and global stability.
:::::::
I have been asking this question since the price of corn began to skyrocket. But this is the tip of the proverbial iceburg. When will our Congress INSIST on a rational and productive energy policy overall, that benefits AMERICA AND ITS CITIZENS?...and not just special interests that keep them in empowered with plenty of campaign money...
We, the American public, continue to wait for the Congress, et al, to do its job, work VISIBLY toward energy independence with both nuclear and petro power, to get us out of the grip of faddish and hostile energy sources?
It’s not a disaster and the planet still produces twice the human food needed to feed everybody. Distribution is a problem. Biofuels was supposed to reduce pollution and maybe it does or maybe it doesn’t but it sure doesn’t reduce oil dependency, but it also isn’t causing grain shortages. Grain production was actually up 5% last year..
As usual we are in a damned if you, damned if you don't situation.
It amazes me how many people I work with think all this is one giant conspiracy by corporations to keep prices and profits high.
At over $4 a gallon, truckers are going belly up in droves. (Each fill of 300 gallons = over $1200. They are getting a couple hundred to negative payouts - for weeks now. They can't stay afloat.
OO's (owner operator's) are turning in leases in record numbers, which is a desperate act as it means they no longer will, or in future have a job with the present company they contract with, but it will be a black mark on their record.
Independent OO's are parking their trucks and looking for other ways to at least make money for living expenses - they are having to sell their rigs and/or go bankrupt - but they can't keep going in the hole hundreds of dollars each week.
Everything we buy is trucked from somewhere. Those fuel prices will soon be translated into higher shipping costs which will result ultimately in higher costs on foods and everything else...
We'd best start screaming at congress - it isn't the first time they have contrived to have a fuel "crisis" in an election year.
This time, it's likely to get away from even them - better stock up on staples...
“Congress subsidized farmers to grow corn by paying oil companies a 52 cents per gallon subsidy” That is a damn lie—they don’t pay us dick to blend gasoline with corn.
Congress subsidized farmers to grow corn by paying oil companies a 52 cents per gallon subsidy to blend biofuels with gasoline.
Comments will get me banned.
“Congress subsidized farmers to grow corn by paying oil companies a 52 cents per gallon subsidy” That is a damn lie—they don’t pay us dick to blend gasoline with corn. In fact, almost all of our profits are put back into the ground. Compared to most industries we retain much less profits—compared to the Insurance Industry, we retain 5% less. The SEC needs to address the problem of reporting that we face—in other words, if profits are put into the ground, then they are not profits. To give a prime example, my company is experiencing record profits on paper, but we are borrowing 10% of our budget to drill more wells...Does that sound evil? I think we have done a lousy job of perception.
Corn ethanol may or may not be a good idea overall but it is not the major factor in high prices for commodities.
Corn was $2 a bushel in 1949, and as recently as a couple years ago. The problem ultimately rests with an inflating US dollar, which means petroleum producers raise their price. If you stop and think about it, this also explains why people are growing corn to turn into fuel in the first place.
ethanol ping
The last week has been a stunning example of this ignorance on parade here on FR. The frightening thing is that when you attempt to set them straight with facts...they refuse to listen.
I think it's the way its written. It's confusing.
Congress subsidized farmers to grow corn by paying oil companies a 52 cents per gallon subsidy
IMHO, I read it as Congress paying oil companies 52 cents a gallon to blend the ethanol and gasoline, thereby increasing the price of corn due to demand. Kind of a back-door 'subsidy' for farmers by increasing the market.
I really don't see it saying farmers were paid that amount.
Just like the MTBE fiasco eventually they will say “now for something completely different”. Then on to the next stupid “green” blunder.
ETHANOL is a bone head dumba$$ move intended to generate votes and revenue for industry. Nothing less, but the consequences are a whole lot more.....
Texas seeks EPA ethanol waiver over high food costs
http://www.freerepublic.com/focus/f-news/2007221/posts
To: stickman20089
Are global food prices rising? Yes. Does ethanol contribute to that? Yes. By how much? Good question, but the UN/FAO estimates that feedstock diversion for ethanol accounts for perhaps 15% of the increase globally. Bear in mind that the U.S. and Brazil produce 91% of the world’s ethanol, and both U.S. and Brazilian corn exports are at record highs. It is a little dodgy to accuse U.S. ethanol of causing the world commodities crunch when we have supported our ethanol industry entirely through increased domestic production.
What then accounts for the rest of the increase? Several things: rising food demand from rapidly developing countries; poor wheat harvests in several major exporters (Russia, Australia, Canada); and of course, the rise in energy costs, which drives up the cost of diesel, fertilizer, irrigation, and pesticides for farmers.
Does so how does ethanol net out if one tries seriously to account for all the feedback loops? Fair minded observers can debate that, and a small army of economists are trying to model it right now. But ethanol last year provided more than 100% of the increase in U.S. gasoline demand. One commonly cited estimate is that gasoline prices in the U.S., absent ethanol, would be 15% higher than they are right now. This does not get reported because both food and fuel costs are rising. This allows the media to report Armageddon on two fronts, but the talking heads notwithstanding, ethanol is a big asset on the energy side. (This will become crystal clear to the MSM if we get a pro-ethanol democrat in the White House.) And it will get bigger if/when cellulosic ethanol begins to come on line.
The impact on U.S. food prices is trickier than the hysterical reporting suggests. The farm price of commodities accounts for about 15% of the U.S. retail food dollar, and the rising cost of oil is itself a major driver of the higher farm cost. The impact on consumers varies widely by product, but for example there is only about 5 cents worth of corn in a box of corn flakes. You could double the price of wheat and it would net out to another nickel a box. The impact is much greater in poor countries where people use less processed food and staples are a much larger part of the diet.
Yes, the U.S. could choose to shut down our ethanol industry in order to accomodate rising demand elsewhere. A better solution IMHO is for other countries to ramp up agricultural production and feed themselves. The world’s aid agencies are in a panic about the food situation in Africa. Africa is a basket case, but I don’t think U.S. energy and agricultural policy both should be compromised to subsidize dumping grain on a continent that could and should be feeding itself.
8 posted on 04/26/2008 4:56:18 AM PDT by sphinx
No kidding. I quit trying to inform with truth, content to leave the ignorant to their bliss.
Why isn’t congress repealing these stupid mandates???
I am not dumb enough!...
Do you know that one of the “byproducts” of ethanol production is a high protein animal feed? I bet not...
The commodity value of the raw material in the cost of food has barely kept up with inflation. Food prices are not going up because of the commodities that are used to make them - it’s manufacturing overhead and government regulation & taxation.
An email sent to me.
“I do not think it is my place to advise anyone about anything however, the following is a must read if we ever intend to get this country back on it’s feet. The best example that can be given of just how true this is will come to you the next time you go to the gas station and fill you car.
Politicians are the only people in the world who create problems and then campaign against them.
Have you ever wondered: if both the Democrats and the Republicans are against deficits, why do we have deficits?
Have you ever wondered: if all the politicians are against inflation and high taxes, why do we have inflation and high taxes?
You and I don’t propose a federal budget. The President does.
You and I don’t have the constitutional authority to vote on appropriations.
The House of Representatives does.
You and I don’t write the tax code, Congress does.
You and I don’t set fiscal policy, Congress does.
You and I don’t control monetary policy, the Federal Reserve Bank does.
One hundred senators, 435 congressmen and one President - 536 human beings out of our 300 million - are directly, legally, morally and individually responsible for the domestic problems that plague this country.
I excluded the members of the Federal Reserve Board because that problem was created by the Congress.
In 1913, Congress delegated its constitutional duty to provide a sound currency to a federally chartered but private central bank.
I excluded all the special interests and lobbyists for a reason: they have no legal authority. They cannot legally coerce a senator, a congressman or a president to do anything.
I don’t care if they offer a politician $1,000,000 in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator’s responsibility to determine how he/she votes.
These 536 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this con game, regardless of party.
What separates a politician from a normal human being is an excessive amount of gall.
No normal human being would have the gall of a Speaker, who stands up and criticizes the President for creating deficits.
The President can only propose a budget. He cannot force the Congress to accept it.
The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for approving appropriations and taxes.
Who is the Speaker of the House? She is the leader of the majority party.
She and fellow House members, not the President, can approve any budget they want.
If the President vetoes it, they can pass it over his veto, if they agree to.
It seems inconceivable that a nation of 300 million can’t replace 536 people who stand convicted — by present facts - of incompetence and irresponsibility.
There’s nary a single domestic problem that is not traceable directly, or indirectly, to those 536 people.
When you fully grasp the plain truth that 536 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.
If the tax code is unfair, it’s because they want it unfair.
If the budget is in the red, it’s because they want it in the red.
If the Marines are in IRAQ , it’s because they want them in IRAQ .
If they don’t participate in Social Security, but are on an elite retirement plan, not available to the people, it’s because they want it that way.
There are no insoluble government problems.
Don’t let these 536 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish ... to lobbyists, whose gifts and advice they can reject ... to regulators, to whom they give the power to regulate and from whom they can take this power.
Above all, don’t let them con you into the belief that there exists disembodied mystical forces like “the economy”, “inflation” or “politics”
that prevent them from doing what they take an oath to do.
Those 536 people - and they alone - are responsible.
They, and they alone, have the power.
They, and they alone, should be held accountable by the people who are their bosses - provided the voters have the gumption to manage their own employees.
Nice post.
Thanks.
July 08 wheat futures were $5.16/bu in April of 2007 and $8.51/bu in 2008 a 164% increase. The figures for the flour show a 328% increase. The increase in price is not all because of wheat prices. Ethanol is not causing a shortage of corn. If we had a shortage we would not still be exporting corn. Just how are farmers to pay for increased costs. Map fertilizer was $225/ton it is now over $1200 for next spring. The cheap subsidized food era may be over.
Ethanol use in the United States isn’t causing food shortages in Haiti and elsewhere.
According to the information by the USDA exports of corn and wheat is at record levels and soybeans was down from the year before but higher than 2 and 4 years ago.
http://www.cbot.com/cbot/pub/static/files/snd_cbt.pdf
From the information above
Corn production in 2008 13,074 Million Bushels
Corn Production in 2003 8,967 Million Bushels
An increase in five years of 4,107 Million Bushels.
Corn for ethanol used in 2008 3,100 Million Bushels.
Yield per acre 2003 129.3
Yield per acre 2008 151.1
Land used to grow corn went up about 16%
Looks to me that the farmers so far has produced ahead of ethanol’s demand.
Acres planted and production of Wheat hasn’t been out of the ordinary. 2004 to 2006 looked like good weather lead to bumper crops but the acres planted was about the same as now.
As for the effect of corn on food prices.
1 bushel of corn produces
5.6 pounds of beef
13 pounds of pork
28 pounds of catfish
33 pounds of chicken.
If a bushel costs $5 the cost per pound
Beef 89 cents a pound
Pork 38 cents a pound
Catfish 18 cents a pound
Chicken 15 cents a pound
Assume that the average dairy cow eats 15lbs of corn a day and make 8 gallons of milk. Assume that the price of corn per bushel is $6 and that there is 56lbs of corn in a bushel. The cost to feed the cow one day is 1.56. divided the cost by the gallons of milk produced would be about 20 cents of a gallon cost to feed corn at the price of $6 a bushel. Sure you have cows not producing milk and bulls but most dairy farms I know grass feed most of the time so 20 cents a gallon sounds about right.
Now lets look at the rise in prices.
Percent change in commodity prices since January 1st
aluminum 29.2
barley 7.5
cocoa 25.9
coffee 23.5
copper 26.3
corn 21.2
cotton 32.0
gold 17.4
lead 32.7
oats 33.8
oil 6.8
silver 37.8
tin 15.5
wheat 32.7
zinc 20.5
Can you explain the government ethanol subsidies distorting all those other commodity prices?
From 1971 to 1974 commodities prices in general rose 134%
From 1977 to 1980 commodities prices rose 78%
As March 07 the current rise in all commodities prices was 88%
What does 1971-1974, 1977-1980 and March 07 to current have in common. It wasn’t a shortage of grain but the devaluation of the dollar.
Do you realize the average American works only 40 days a year to pay for all the food he eats yet works 116 days to pay his taxes.
Which brings me to what I consider is behind all this anti ethanol hysteria. The US government is devaluing the dollar in order to save our bankers. This means that all commodities which has real value will increase in price when traded for something with declining value such as the US dollar.
But the public tends to get mad if they see prices increase so our politicians pulled out their play book from the 1970’s and saw that blaming the producers of commodities was the best way to distract the public from their own actions. We blamed OPEC not Nixon for reducing the value of the dollar. If you was selling a product that you was getting a full dollar for and now they was offering you a dollar only worth 75 cents you would raise the price of your product to 1.25 to get the value of a full dollar.
About 6 months ago all the conservatives media and the liberal media got the same talking points. Ethanol has its problems such as less energy than gasoline but much of the current barrage has gone to doom and gloom exaggeration in order to get people upset more than other things of more importance such as devaluation of the dollar and taxes being raised.
Somebody or some group is behind the fear mongering. People going to starve, we will run out of water, we are going to have to import 3 times the amount of oil to produce ethanol. I started to do research online and found the facts they putting out wasn’t facts. It is global warming for Free Republic. People get emotional and seem to not think for themselves. Don’t take what people tell you at face value even if it is IBD or Rush or some other conservative.
Interesting tidbit
Support payments in 2005 was 9.6 Billion, in 2006 because of higher corn prices it was reduced to 2.1 Billion. Direct payment to the Ethanol producers was 2.5 Billion. So the taxpayers saved about 5 Billion in one year thanks to higher corn prices.
In other words a higher price of corn saves the taxpayer more than the subsidy for ethanol (which at the current price of gasoline I think should be removed). Another thing to think about is that a few hundred ethanol blenders has less political power than the Farmers. It is politically easier to end corn subsidies through higher prices for corn due in part to ethanol and then end the blending subsidy to the blenders.
I find it odd that the Shell stations in my area are selling Milk for 2.99 a gallon.
What do you expect when over 90% of our legislatures are lawyers who only listen to the people that give them big bucks?
Mark
The ethanol mandate is certainly leading to higher food prices. 25% of the corn crop is devoted to ethanol. Such a large shift in demand will have lots of potential for upward price pressure on food. Unfortunately, the mandates are getting much larger. Nearly 1/3 of the corn crop will be needed to meet the increasing mandate in the next few years.
Corn based ethanol is pure pork. Without the subsidies, mandates, and import tariffs, demand for corn based ethanol would drop dramatically. The food to fuel policy is madness. When will the ethanol backers admit the madness of this policy? The policy is already boondoggle without the dramatic rise in mandated biofuel. When the full mandate happens, boondoggle will be a huge understatement.
That does not explain a 300% increase in wheat prices in the last year. Plus, you completely ignored the undisputed fact that US wheat production is at its lowest level in 60 years. Government regulation and manufacturing problems did not create this problem in a single year. When you pay farmers and the oil industry to grow corn for fuel, somebody’s gonna get hit — and its us.
You got it right — It’s a back door subsidy paid to oil companies and passed on to farmers when they purchase corn.
Swiss-Keep telling the truth.After awhile even
Freepers do get educated.
Main points to consider.——
In last 10 yrs farmers have increased corn production
for food and feed stock 31%..... plus the extra needed
for ethanol.
Many other nations used to export food hurting their
people, and now they are doing the right thing, cutting
exports, but this creates shortages in places that don’t
have viable ag economy to match needs.
Farmers get no price supports now, and oil companies got
about 4 billion in tax credits(no pmts just credits
like the depletion allowances of 20 times more they get).
Suppose corn prices drop and say go a dollar a bushel
less than production costs, and then you have to prop up
farms with 14 billion for corn pmts to farms, plus
many more billions on other products as they would drop
also. So maybe best to just phase out BIG OILS credit
and straighten out investors and speculators the
major factor in product prices being driven up.Oil also.
Farm groups the other day asked the FTC to get
speculators slowed down and require a little more
investment risk in commodities. FTC refused. Maybe
Congress will fix it. They have the power, but many
want high food and controversy to win WH change
this year. But they are playing with monsters, oil
included being speculated up, that may bite them.
It ain’t ethanol, as the more valuable part of what
comes out of refinery, high protein feed makes about
4 lbs of meat out of each bushel when feed to critters. And if it is all feed you would multiply that
by 3.5 billion bushels going though process and
you have about 14 billion lbs of meat. Ethanol
will be about 7 billion gal from same bunch of
corn.Plus other products.It ain’t ethanol, it
is just a whipping boy to cover to hide all other
problems mainly specuators and high energy.Ed
How many gallons of biofuel does a Democrat Congressman yield?
Wheat has only doubled in a year, a 100%
increase, Look at CBOT. But that means that
there is 12 cents worth of wheat in a loaf instead
of 6 cents. The rest is energy cost for middlemen
and/or greed on their part, retailers costs,etc,
mostly hit by big energy rises. Said rises are a lot of
effect, of rampant speculation in food and oil.Ed
Bump for later read, looks very good but I am seeing double.
If you pumped out Teddy you’d get a bunch.....
The plan isn’t to put whole corn crop into
ethanol, as they plan half coming from other sources
and imports..The corn acreage is 93 million acres,
and 1/4 goes to refinery. That will produce 7 Billion gals from 23 Million acres. If they increase acreage by a third there would be 30 million more, giving another 7 Billion
gals, plus more. And plus they increase production per
acre about 3-4% every year now for over a decade.
And the extra acreage is out there as we have
about 80 million acres underused/unused.And we could increase other crop acres also.Ed
(due to pubbie voters who were SOOOOoooo smart to vote in the RATs to "teach the pubbies a lesson"
Yep. That worked well.
Now the same upside down thinkers aren't going to sully their precious 'principles' to vote for McCain - that'll work well too.
All the while China is pumping crude out of the Florida Straits where a 10 billion barrel oil field has been off limits to American oil companies for decades because of ecofreak fears that FL's beaches might be contaminated by oil spills. The irony is that China doesn't care if Florida's beaches are fouled by oil spills, and American drillers are experts at preventing those spills. So OUR oil is going to China despite the oil spill danger, which is far more likely to be spilled by the Chinese than by our own oil drillers, and the 115 billion barrels of oil and 633 trillion cubic feet of natural gas that lie within our coastal waters is off limits to American companies.
If a Martian invasion force landed in Washington and sized up how Congress is totally bungling the oil and gas crisis almost beyond belief, they would say "these people are too stupid for us to bother with enslaving them, let's go invade a planet where intelligent life exists".
The United States is in this position because Al Gore cast a tie-breaking vote for this mandate.
Another reason why it matters if the Rats have the White House.
Wheat took off when there were reports from Australia of a drouth, I don’t follow the markets extremely closely but a lot closer than many - and that incident seemed to be a good demarcation of the commodities run up, though not just wheat. Why, I don’t know - but that’s the when.
Perhaps some truth in that. Oil remains the main force.
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