Skip to comments.The Ethanol Chickens Come Home to Roost
Posted on 07/27/2012 3:58:23 AM PDT by IbJensen
After a year full of victories for big government legislation in Congress, the forces of statism seemed to have met their Waterloo with the farm/food stamp bill. The more people learned of the profligate food stamp spending and the market distorting, risk-inducing agriculture programs contained in the bill, the more they spoke out against this monstrosity. Speaker Boehner has refused to bring the bill to the floor so far.
Seeing their political stock rapidly diminish, the bipartisan coalition of government-run agriculture took a page out of Rahm Emanuels playbook and decided not to let the crisis of the summer drought go to waste. They are using evocative imagery of dead crops and the fear of higher food prices to shove this $957 billion behemoth through Congress. Amazingly enough, the Washington Post of all news outlets has injected some much-needed clarity into this narrative:
But keep the potential hardship to producers and consumers in perspective. U.S. farmers face this drought in their strongest financial position in history, buoyed by less debt, record-high grain and land prices, plus greater production and exports, reported Christine Stebbins of Reuters, after a thorough canvassing of industry and government experts. Farm losses should be far smaller than those suffered in the last big drought 24 years ago.
In fact, the Agriculture Department estimates that government-subsidized crop insurance covers more than 80 percent of farmland planted with major field crops at least two of which, wheat and cotton, appear pretty much unaffected by the dry weather anyway. Dairy farms are the least likely to be in drought-ravaged areas, the USDA reports. And many of them enjoy federally subsidized insurance against rising feed costs. [ ]
And before Congress rushes through the farm bill, its worth reflecting on all the ways existing policies worsen the droughts impact. More corn would be available for animals if not for federal ethanol mandates. One reason for drought- and flood-related crop losses is that federally subsidized crop insurance encourages farmers to cultivate marginal land and engage in other risky practices, knowing that taxpayers will, in effect, bail them out. Both the House and Senate versions of the farm bill would increase subsidized crop insurance, thus accentuating this moral hazard.
Im not sure whether the Washington Post is only supportive of urban welfare or whether they stumbled upon a random appreciation for market forces. Either way, they are 100% correct.
Undoubtedly, a severe drought is going to bring some pain to both farmers and consumers. Theres no way around that. However, commodity prices are higher than ever, farmers are richer than ever, and most of their losses will be covered by existing crop insurance. If government would stop subsidizing overly risky behavior, that insurance could be administered by the private sector. But the single most damaging factor in distorting the crop market, particularly the corn crop, is the governments ethanol policy. Over the past decade, ethanol has been the poster child for the worst aspects of big-government crony capitalism. The ethanol industry has used the fist of government to mandate that fuel blenders use their product, to subsidize their production with refundable tax credits, and to impose tariffs on more efficient sugar-based ethanol from Brazil. These policies have distorted the market for corn to such a degree that 44% of all corn grown in the country is diverted towards motor fuel blends. If we would literally flush half the corn harvest down the toilet, we would be better off than using it to make our motor fuel less efficient.
Thankfully, we have rid ourselves of the 45-cent per gallon Volumetric Ethanol Excise Tax Credit (VEETC) and the 54-cent-per-gallon import tariff. Although the farm bill grants more subsidies through the Biomass Crop Assistance Program a program in which the taxpayer provides up to 50% of a farmers expenses used to plant biomass crops. But the most egregious part of the three-legged ethanol beast the mandate is still intact. There is no worse form of tyranny than using the boot of government to force consumers to purchase a particular product. It is especially egregious to make our corn crop so scarce during a time of drought. We should have an abundance of corn from US Reserves, but the ethanol boondoggle has drained out our bountiful harvests.
If supporters of centrally-planned agriculture want to use the crisis to push through a massive farm bill, most of which goes towards the food stamp program, we should use it to eliminate the ethanol mandate.
They want to feed the hungry....fine, let them all become missionaries or join the peace corps. Do it with their own money, not taxpayers.
But the small engine repair shops are booming from all the damage caused by ethonol-laced fuel.
The ethanol eats rubber fuel lines.
The damage sends particles of the inner rubber into filters and carbureters and fuel injection systems, stopping them up and reqiring expensive repairs,
Ethanol can be manufactured from natural gas and coal 30% cheaper than corn based ethanol. We can use our coal and gas reserves to cut down on foreign oil, lower the price of fuel for everyone, and divert our food to food uses.
ethanol cannot exist without government subsidy... so screw the rubber eating acid. Corn alcohol is for drinking and not running in engines... period!
Worse than forcing consumption of corn ethanol is to force blenders to buy cellulosic ethanol - and then penalizing them when there is no cellulosic ethanol on the market, forcing gas prices higher yet since consumers ultimately pay for the non-existent fairy dust.
The entire central socialist govenment and much of the state governments suffer from dementia and need to be placed in padded cells. At any rate they need to be kept away from the populace.
Does any one have any hope of getting this crap out of our gas?
. . . major field crops at least two of which, wheat and cotton, appear pretty much unaffected by the dry weather anyway.
Anecdotal evidence for this - we just drove through L.A. (Lower Alabama for those of you not familiar with the South) last Sunday. Definitely saw a few fields of burned-out corn that simply was gone, not going to be a crop this year. Saw lots of healthy looking cotton as well in the same areas.
What an article filled with absolute freaking bald faced lies.
First off, those higher corn prices have come with higher input prices for fuel and ammonia, so the profit isn’t that great. And higher land prices add to that with higher property taxes and capital costs for farmers buying/renting land to farm. The wealth-hate in the article is obvious even if it is misplaced.
The byproduct of ethanol is DDG. It is used as both animal and human food, and if the stillage is kept out as it should be, it is a fine product to feed to animals as it is high in protein and lower in carb and fat than corn.
The paranoid delusion rantings about the supposed farm lobby juggernaut seem hilarious in light of the fact that somehow, despite all their power, the blending and import subsidies expired unceremoniously. The other credit they mention, I doubt most farmers know about it or can take it, as their corn goes direct to market and not directly to ethanol production.
I hate mandates as much as the next person, but don’t cloud the issue with a bunch of other ideologically driven BS.
And how about getting the price of diesel back where it belongs. India pays only 2,39/gal for diesel. Doesn’t everyone wonder why the price of groceries and other goods are so damned high? The federales are playing games with the fuel!
A local farmer said that's all he grows now....corn for the ethanol plant....no beans, no eating corn, no grains....
We are a stuck on stupid. People have always asked...What if we have a drought....Well, we're going to pay for it.
When's the lst time you had a GOOD cut of beef??
You got that right. The first time I took one of my small engines into the local repair guy, he laughed and said his business is booming thanks to ethanol. Since I now only use premium for my small engines, I expect to see a lot less of him in the future.
Where’s the link?
Diesel fuel is heavily subsidized by the Indian government.
Do you want the US Fedgov to create more Baraqqi/Bernanke/Geithner minibucks to do the same?
Does premium fuel in your area have less/no ethanol?
Ethanol plants here in Indiana are closing up faster than K-Marts in the 1990s.
With the repeal of the domestic subsidy and the repeal of the import tariff, I’m assuming Brazilian sugar cane derived ethanol is taking the place of domestic production.
Around here (Atlanta), premium is also polluted with 10% ethanol.
no ethanol in the premium. The other two fills, regular and some higher octane blend, have ethanol. The regular can have as much as ten percent. Across the river in Minnesota along with the three grades of fuel I mentioned, they have something called E-85 which can have up to an 85% denatured ethanol and gasoline blend. Not available in Wisconsin where I live.
I'd have someone check to see if someone or some people in your state government and the small-engine repair shops are colluding. (snicker)
***ethanol cannot exist without government subsidy***
I remember when Jimmy Carter tried to pass off ethanol on us back in the late 1970s. As soon as he was removed from office the fad passed and everyone went back to real gas.
In so far as I know, I don’t use any ethanol in my diesel car which gets me 27-30 mpg in pure city driving so I speak from a neutral viewpoint!
Frankly, I am afraid that this is one of those situations that would be called a conspiracy if it were not for the fact that it was almost all out in the open! You have big corporations, Archer-Daniel-Midland for one, that love another market for their corn and you have farmers in almost every state who feel the same way. We have bipartisan politicos who think that ethanol would be US profit replacing foreign oil imports and see little down-side risk from this operation but boosts to their popularity and campaign contributions.
Now we see that, unlike oil, there is a the potential for things like the current drought that materially change the availability of an agricultural product. We see that corn, as an ESSENTIAL multi-species food product, has an impact when there are non-elastic demands set by law for use in non-food industries like motor fuel. We also see that, unlike the early rosy projections of a natural alternative to evil oil, ethanol has a much greater environmental cost than was initially realized let alone the fact that ethanol is detrimental in its fuel use.
So, what do we do now? Logic states that corn is far better used as a food source than as a fuel additive. So, that means that the laws mandating use of corn as a fuel feedstock should be removed. Continuing research into non-food ethanol should continue along with research on engine design to better use such ethanol.
Anyway, I plan to start eating dirt as it seems to be the only thing that is not about to skyrocket in cost over next year!
Diesel fuel SHOULD use very little refining; however, the central socialist govenment has made diesel more expensive than refined gasoline.
The government designs your cars, your car seats, your light bulbs and you damned toilet tank!
Not in Indiana. We’ve had mostly E10 since the 1980s.
And our local alky must be better than a lot of the others, because most of my OPE is old, old, old and I’ve not had fuel system problems at all.
The only one was a fairly new Weedeater trimmer and that was due to sh!tty Chinese polymers in the fuel lines. When I replaced them with some US sourced stuff it’s been fine.
For those on FR having all the engine problems, it would seem to be well worth it to go here:
Diesel has more btu per unit volume than gasoline, so if you price on energy content, it should be higher.
There are some problems both ways with this.
First of all, ethanol is b.s. and a huge waste of corn.
However, food stamps are completely different from any other form of welfare, so should not be lumped together with largesse. This is because American agribusiness is downright surreal at times.
Even at the height of the Dust Bowl, when tens of thousands of farms were wiped out from Texas all the way to Canada, those farmers outside of the Dust Bowl region were still producing too much food for America to eat.
Combined with deflation, where there was not enough physical currency to buy anything, crops became worthless, with wheat down to 25 cents a bushel, and corn being burned for fuel. It cost more to transport to market than it was worth. At the same time, in other parts of the US, people were starving.
FDR’s response was to send government agents to every producing farm with orders to *destroy* food. With some of the excess given to charities to give out in soup kitchens.
In perspective, one of their first acts was to kill and bury six million pigs. This is the scale I’m talking about.
And ever since that time, American agriculture has been made into a fascist economic model called a “public private partnership”, which means “semi-nationalized”. The government tells farmers what they are *allowed* to produce, but leave it up to the farmers to actually produce.
A problem with this model is that in every part of the process, the government has to inject money. Vast amounts of money, to keep production and prices stable.
Yet part of this is to insure there is never shortage, always surplus. And the government buys up this surplus and expensively warehouses it until it rots. Every year.
This warehousing is so expensive that when Reagan gave away the “government cheese” surplus, it actually *saved* the government millions of dollars.
And importantly, it had little or no effect on the price of retail cheese. And this is vitally important.
Most of the food that people who buy their food, buy, has been processed. They much prefer that over bulk food they have to cook.
So optimally, people on food stamps should get most of their food in an unprocessed form. Flour, sugar, produce, and raw meat, which they have to cook themselves. Were it done this way, every single person in the US that wanted free food could get it, and it would not effect the price of processed food one bit!
But the processed food manufacturers have lobbied long and hard so that people on food stamps could get their food as well. So when people on food stamps buy processed food, of course it pushes up the price for everyone else.
Finally, when there is talk of “welfare reform”, invariably somebody tries to lump food stamps together with cash payments as something that should be cut back.
First of all, hunger is a crappy motivator. Second, do you want to spend *more* money storing surplus food than it costs to give it away? And third, by giving away excess, of just those foods that are in excess, it stabilizes prices so the government does not need to pump more cash into the system.
So what needs to be done?
First of all, the situation could be de-federalized to a great extent. Give the states block grants and the ability to set their own rules, as well as emphasizing foods that state produces over “imported” foods. If a state produces an abundance of apples, in addition to food stamps, the poor should get the state overflow.
Lots of taxpayer money saved. Poor people eat, though their cash welfare payments can be seriously reformed.
Federal mandate for more alien energy (Brazil). Thanks for the good news!
Gasahol... I remember it well... and the lawsuits that drove it out of the marketplace.
Hereabouts there are two stations that sell pure gasoline, albeit at a 10-20% premium. They seem to do a pretty good trade.
You better believe it. My boat wouldn't start while on the middle of a lake. I had all my guns an ammunition on board at the time. A thunderstorm blew up and swamped the boat. Luckily I was able to swim to shore. Alas, all my guns and ammo were lost but I feel lucky to be alive.
More business for Brazil!
You can find a list of non-ethanol gasoline at http://pure-gas.org .
Shell and Marathon seem to have the most pure gasoline available, along with some no-names. Typically, it is available only in premium grade (90-93 octane), though I have seen it at 87 octane as well in farm areas in southern Illinois.
I have a 90 mile commute, and have found gas stations with pure fuel at both ends of the trip and on the highway in the middle.
There are plenty of E-85 stations in Wisconsin. Check:
Right now, I know of no good reason to use E-85 unless you want high octane with low BTUs. The price is close to on par with E10, and you pay a serious (15-20%) mileage premium.
The 100% gas usually carries a 10 to 20 cent price premium over equivalent E-10, but you also get roughly 2.5% more BTUs, so it is practically a wash, and it makes your engine happier.
I’m either using the wrong gas station or I’m not seeing the E-85 at any of the pumps where I get my gas. But if there are stations in Wisconsin that have it, and it appears there are, I stand corrected.
Doesn’t premium fuel contain ethanol as well? I’ll have to check, but I think my Toro lawnmower says to use no higher than 87 octane.
All I know is I had to take three small engines to the repair guy before I switched to premium. All had the same ethanol-caused problem. Gummy carburetor. No problems since. No ethanol in the premium I use.
Thanks for the info. And I checked my Toro lawn mower manual. It says no lower than 77 octane but doesn’t mention an upper limit, so I’m switching to premium for my small engines.
Farming without subsidies? Some lessons from New Zealand
Output and net incomes for the New Zealand dairy industry are higher now than before subsidies ended—and the cost of milk production is among the lowest in the world.
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