Posted on 09/04/2011 4:19:35 PM PDT by blam
Why Food For Fuel Is A Terrible Idea
By Jonathan Chen
Benzinga Staff Writer
September 02, 2011 12:17 PM
Pretty soon, corn will be more valuable than a barrel of oil.
There is an article on Bloomberg Government from last month that still holds true today. (Gasp! Something written more than 30 seconds ago still holds true?)
It is a sad fact that the U.S. is using corn almost as much as Saudi oil as fuel in this country. The "food for fuel" idea has been around for a long time, and it has been seen as a bailout of the farmers of the past who were unable to sell their excess corn.
That time has come and gone, with the world's population approaching 7 billion later this year.
In the article, senior finance analyst Vijay Sankaran talks about what exactly is going on. He goes on to say that Ethanol is impacting the various Republican presidential candidates, as some support the "bailout" of the farmers, while others, like former Utah Governor Jon Huntsman Jr. do not.
Sankaran writes, "The U.S. government has supported the ethanol industry through a series of tax credits and tariffs. In addition President George W. Bush signed legislation in 2005 mandating how much ethanol should be in gasoline consumed in the U.S. The volume under this Renewable Fuel Standard was 9 billion gallons in 2008.
The mandated volume will reach 15 billion gallons by 2015, the same amount of crude oil the U.S. imported from Saudi Arabia in 2009. Saudi Arabia dropped from being the top single source of crude oil for the U.S. in 2000 to the third-biggest in 2010, behind Canada and Mexico, according to the Energy Information Administration."
President Bush had a good idea to try to increase jobs in the United States, and at the same time, get the U.S. off its addiction of foreign oil. However, this idea has a terrible side affect. It has caused corn prices to soar, as evidenced by this chart. Using food for fuel is a terrible idea, as it constrains one commodity to try to replace another. We have seen the rise in corn prices affect everything we eat. Meat has become more expensive, as feed for cattle has become more expensive. This is evidenced by both live cattle and feeder cattle.
As the world's population continues to grow, and corn supplies continue to be even more constrained, we will see prices rise. It's basic economics. The law of supply and demand. This has never been more precedent than what we are seeing in the fertilizer names, like Potash (NYSE: POT), CF Industries (NYSE: CF [FREE Stock Trend Analysis]) and Mosaic (NYSE: MOS). These companies are seeing record earnings, thanks in part to farmers' demand for fertilizers.
When Potash released earnings, President and Chief Executive Officer Bill Doyle said, “The continuation of strong fertilizer demand combined with the limitations of global production, especially in potash, resulted in tight fertilizer markets and rising prices for our products. With farmers committed to increasing yields and capitalizing on the unprecedented economic opportunity, we worked to keep pace with growing demand, which resulted in a record quarter for our company. We believe our ongoing investment in expanding potash operational capability is playing an integral role in the world's food story, and we demonstrated our increased ability to deliver – for our customers and our shareholders.”
"[U]nprecedented economic opportunity." Those three words should ring echoes in Washington, and unfortunately, they are not. It is one thing to try to help your country's exports, which is the job of any President. It is completely another to do it haphazardly. When it is hurting everyone, especially the lower and middle classes, it does net no economic good.
The Obama administration has tried to move towards electric cars and furthering this process, but unfortunately, mass production and wide spread adoption of electric cars is years away. Most Republicans back the ethanol tax credit and subsidies provided to farmers, as that is where the majority of their constituents are based. Nebraska. Iowa. Idaho.
Until the food for fuel mantra changes in Washington, inflation will only continue to hurt those that can barely bear the brunt of it now.
Agreed.
It’s the New World Order’s (The Evil Empire’s) intent to create famine and death anywhere they can. Burning up the corn is one way.
Surplus; The American Farmers produce more foodstuffs than our citizens can consume.
This has been going on since at least the 1950’s, and for a long period of time the US government managed the problem with a ‘Cheap Food for Consumers’ program most often labeled ‘The Farm Program’. There were constant cries of paying farmers not to plant.
With the advent of ethanol, farmers began receiving enough return on their investment, and as a result, most no longer use ‘The Cheap Food for Consumers’ programs.
Now there are cries that food is too expensive.
Too bad, the consumer got what they wished for, no more paying farmers not to plant. Too bad they weren’t wise enough to see what getting their wish would all entail.
You can change the subject if you want, I can shift gears.
But let’s stick to one issue at a time. Corn is not a basic food crop.
Yes, you can eat corn flakes for breakfast. The box costs more than the corn itself. As a percentage of the US corn production though, it is infinetismal. Would you concede the fact that most of the corn grown has always been used as feed for livestock?
Note, that’s a question.
Agricultural subsidies is another issue. The short answer to my way of thinking, there are an awful lot of .gov subsidies that (should) probably get the axe (sorry, scalpel. Hm.) than the people who grow our food.
Subsidies, we can talk about those too. Can we agree that oil is subsidized as well? Further, corn (as well as other crops) are renewable! Oil, once burned, is gone.
Again, I am open to discussing facts. When I point out that corn is used as primarily livestock feed, somebody opines that Ethanol runs poorly in their F150.
Well, duh. It’s a gasoline engine. We can talk auto shop too, etc., but again, different subject.
But let’s stick to one issue at a time. Corn is not a basic food crop.
5,250 million bu. - livestock feed BASIC FOOD
3,650 million bu. - ethanol production
1,850 million bu. - exports BASIC FOOD
943 million bu. - production of starch, corn oil, sweeteners (HFCS,etc.) BASIC FOOD
327 million bu. - human consumption - grits, corn flour, corn meal, beverage alcohol BASIC FOOD
Oh, ok only about 75% is used as a basic food or foodstock. 25% is subsidized to burn in gas tanks. Take away the subsidy and 100% is used as a BASIC FOOD CROP, either directly consumed or used to produce other foods.
Yes, you can eat corn flakes for breakfast. The box costs more than the corn itself. As a percentage of the US corn production though, it is infinetismal. Would you concede the fact that most of the corn grown has always been used as feed for livestock?
See above.
Note, that’s a question.
Note, I always recognized that corn was a cattle and pig feed. As such it is a BASIC FOOD CROP. Humans eat pigs and cattle. Corn is fed to pigs and cattle so that humans can eat them. You can't get any more basic than that.
Agricultural subsidies is another issue. The short answer to my way of thinking, there are an awful lot of .gov subsidies that (should) probably get the axe (sorry, scalpel. Hm.) than the people who grow our food.
And that is an emotional argument. No facts "...to my way of thinking...", just emotion and your opinion. So, how about some facts.
Subsidies, we can talk about those too. Can we agree that oil is subsidized as well?
Nope. How so?
Further, corn (as well as other crops) are renewable! Oil, once burned, is gone.
There is enough oil in North America to last for hundreds of years. That's enough for me. You will not replace a significant portion of gasoline use with ethanol. You will not replace an ounce of gasoline use with ethanol without a government subsidy. You will, however, increase the cost of corn, all all the other basic food stuffs that input corn, if you try.
Again, I am open to discussing facts. When I point out that corn is used as primarily livestock feed, somebody opines that Ethanol runs poorly in their F150. Well, duh. It’s a gasoline engine. We can talk auto shop too, etc., but again, different subject.
No, a basic food crop would be one that majority utilize as their basic sustenance.
You would agree that Americans do not largely or even in part, sustain themselves on cornmeal. Am I correct in that?
It’s not a basic food crop. So the initial claim isn’t factual. Next, upon this mistaken assumption, yet another falsehood is laid, the notion that this food is being wholly consumed e.g. “food into fuel”.
That, it turns out, isn’t true either. Merely the starch is extracted and turned into alcohol. The remaining grains are STILL FOOD!
Another excellent use of wheat, is to turn it into BEER. Barley, tons of it, is grown and converted into a tasty, nutritious beverage.
BEER, therefore, IS A FOOD CROP. It should be heavily subsidized, and any and all taxes be rescinded. Thank me later.
I really don’t care what a farmer chooses to grow or what he chooses to do with his crop (in a free market).
But I sure as hell hate the facts that:
(1) I am forced to subsidize him with my tax money and;
(2) I am forced to buy the product.
“Because I am forced to buy the product.”
Yes, the government forces us to do all sorts of things. MTBE is a gasoline additive required by the government. Then it was banned by the government. So 10% ethanol was substituted, in lieu of MTBE.
Don’t get mad at farmers is all I’m saying. They help feed the world with all kinds of products. In fact, it is one bright spot in the economy.
“...Don’t get mad at farmers is all I’m saying...”
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Gee, why should I blame the farmers,
who push for the protection,
elect politicians to lobby for the protection,
and accept the proceeds from the protection?
It's not polite to talk with food in your mouth.
Point is one way or another the corn should become food, be it as vegetable, meat, or nightcap.
Putting perfectly good grain alcohol in an internal combustion engine instead of a mixed drink is just...wrong.
Oh, so you have gasohol in your mouth, boy?
How’s that crap taste?
No, you ungrateful bastard, you are eating from the largest table ever set for mankind, and at the cheapest price mankind has ever paid for such a table.
Yet you slander whose who provided all of that for you.
Spit out that gasohol when you talk.
Why?
You do realize that ethanol, whether you like it or not, has allowed the farmers to reject the government farm programs?
No more paying farmers ‘not to plant’, which was a commom and continuous complaint even here at FR not a dozen years ago.
Said all I need to say here:
http://www.freerepublic.com/focus/news/2773625/posts?page=47#47
and here:
http://www.freerepublic.com/focus/news/2773625/posts?page=49#49
You have a personal interest and that foul taste in your mouth
is because you are the beneficiary of other peoples misery
imposed by the government subsidy to the ethanol producers
and the blending mandate to the petroleum refiners.
LOL! Nope.
Ah yes, rhere’s no point in my arguing with a fool.
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