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Dimwit Energy Policies, Record Corn Prices ^ | August 11, 2012 | Mike Shedlock

Posted on 08/11/2012 5:41:24 AM PDT by Kaslin

The price of corn is at all all-time high because of extreme drought conditions in the US coupled with the hottest July temperatures since records began 117 years ago.

Inane Policies

US policy mandates production of ethanol for blending in gasoline. That ethanol comes mostly from corn.

Diverting corn crops to inefficient ethanol production has members of the Group of 20 leading economies – including France, India and China – concerned about the US ethanol policy.

In response, the UN urges US to cut ethanol production

The US is poised to divert around 40 per cent of its corn into ethanol because of the Congress-enacted mandate despite “huge damage” to the crop because of the worst drought in at least half a century, José Graziano da Silva, director-general of the UN’s Food and Agriculture Organisation, warned.

“An immediate, temporary suspension of that [ethanol] mandate would give some respite to the market and allow more of the crop to be channelled towards food and feed uses,” he wrote in an opinion piece in the Financial Times.

Tom Vilsack, US agriculture secretary, raised doubts about the impact of waiving the ethanol mandate, arguing that the US biofuel industry had reduced petrol prices and created jobs.
Economic Dimwit or Shill?

The question at hand is whether the US agriculture secretary is an economic dimwit, a shill for the Obama administration, a shill for corn producers, or some combination thereof.

The US biofuel industry certainly has not reduced the price of gasoline. Tariffs on imported ethanol have kept the price of ethanol artificially high (but they did expire in December).

Fundamentally, government policies do not create job, they cost jobs. The best way to create jobs is for government to get the hell out of the way and let the free market work.

I do not know how much corn prices would drop if the US ended its inane biofuel policies. What I do know is  government interventions and government-sponsored solutions never do any good.

Romney an Energy Pretzel

Which is worse? Being consistently wrong, or blowing so much in the wind voters haven't a clue what you stand for?

Before deciding, please consider Mitt Romney, the pretzel candidate by George Will (written October 28, 2011).

Obama, a floundering naif who thinks ATMs aggravate unemployment, is bewildered by a national tragedy of shattered dreams, decaying workforce skills and forgone wealth creation.

Romney cannot enunciate a defensible, or even decipherable, ethanol policy.

Life poses difficult choices, but not about ethanol. Government subsidizes ethanol production, imposes tariffs to protect manufacturers of it and mandates the use of it — and it injures the nation’s and the world’s economic, environmental, and social (it raises food prices) well-being.

In May, in corn-growing Iowa, Romney said, “I support” — present tense — “the subsidy of ethanol.” And: “I believe ethanol is an important part of our energy solution for this country.” But in October he told Iowans he is “a business guy,” so as president he would review this bipartisan — the last Republican president was an ethanol enthusiast — folly.

Romney said that he once favored (past tense) subsidies to get the ethanol industry “on its feet.” But Romney added, “I’ve indicated I didn’t think the subsidy had to go on forever.”

Ethanol subsidies expire in December, but “I might have looked at more of a decline over time” because of “the importance of ethanol as a domestic fuel.” Besides, “ethanol is part of national security.” However, “I don’t want to say” I will propose new subsidies. Still, ethanol has “become an important source of amplifying our energy capacity.” Anyway, ethanol should “continue to have prospects of growing its share of” transportation fuels.

Got it?
If anyone truly knows where Romney stands on ethanol, please tell me. Better yet, please tell Romney.

TOPICS: Business/Economy; Editorial
KEYWORDS: apaulogists; cinos; fff; finos; ntsa; opec

1 posted on 08/11/2012 5:41:30 AM PDT by Kaslin
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To: AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; ColdOne; Convert from ECUSA; ...

2 posted on 08/11/2012 5:56:26 AM PDT by SunkenCiv (
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To: Kaslin

The”Ethanol”policy is nothing more than BIG PAYBACK to BIG FARM(Cargill,Archer,Daniels,Midlands)!!!

3 posted on 08/11/2012 6:08:57 AM PDT by bandleader
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To: Kaslin

This argument is a non-starter and borders on nonsensical.

If Americans would quit using ethanol for fuel, quit eating meat (food animals actually consume most of the corn crop), and if farmers were forced to grow corn without regard to profit, it would be almost free to everyone in the Third World.

That’s the intellectual level of this argument. It’s certainly unworthy of Shedlock.

4 posted on 08/11/2012 6:09:09 AM PDT by jjotto ("Ya could look it up!")
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To: Kaslin

“The US is poised to divert around 40 per cent of its corn into ethanol because of the Congress-enacted mandate”

Anyone know who this mandate applies to?

5 posted on 08/11/2012 6:28:39 AM PDT by Darth Reardon (No offense to drunken sailors)
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To: jjotto
I don't think the UN or any other foreign entity or nation should be telling the US what to do.

However, subsidizing an industry that burns 40% of a basic food crop in the nation's cars while you stop exploitation of vast oil reserves is insane. Borrowing 40 cents of every dollar spent to subsidize this practice compounds the problem.

To borrow a phrase, it is not sustainable. The subsidy will end, one way or the other.

6 posted on 08/11/2012 6:33:58 AM PDT by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, we'll just grow algae.)
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To: Kaslin
I keep hearing on FOX from political talking heads that we cannot go without Ethanol
and Ethanol is what makes our Gas prices affordable.

Can someone expose this BS please.

7 posted on 08/11/2012 6:36:50 AM PDT by MaxMax
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To: Former Proud Canadian


to all:

I have the perfect solution-

Soylent Green

8 posted on 08/11/2012 6:41:09 AM PDT by mj1234
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To: Former Proud Canadian

I am unaware of the subsidy you describe.

Something like 94 million acres in the US were planted in corn this year. That’s the most acres since the the 1930s. Where would drought year corn prices be with no ethanol and a continued downward trend of corn acres to less than 70 million planted in corn?

9 posted on 08/11/2012 6:41:51 AM PDT by jjotto ("Ya could look it up!")
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To: Kaslin

Gasoline now has a shelf life of about a month before it starts breaking down.
It destroys rubber hose lines and seals
Boats get water in their fuel systems
Small engines run hotter and are destroyed sooner
Less gas mileage

Forced to buy stabilisers such as Stay-bil and their help is only partial.

10 posted on 08/11/2012 6:58:23 AM PDT by Venturer
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To: Kaslin

The U.S. ethanol industry was built out on the basis of higher yields driven by seed technology and precision farming. We have not shorted traditional markets for food, feed, and export; we have instead increased production to feedstock a new market. (In fact, internationally we have been losing market share to Argentina and Brazil, the other two major exporters, for whom the U.S. drought represents an opportunity.) Two months ago we were anticipating an all-time record crop, and about 40% of it was expected to go for ethanol. That 40% would not have been planted in the first place but for ethanol.

Then came the drought, and the cries go up for the ethanol industry to fall on its sword. How about calling on importing countries to remove tariff barriers and accept free trade in agricultural products? How about calling on the EU and others to adopt biotech and boost their own yields? Why should U.S. agriculture be run on a concessionary basis as an international utility expected to subsidize others’ inefficiencies and biases?

Americans currently spend less than six percent of disposable income on food to be eaten at home. That’s an all-time low. Including food eaten away from home, we spend less than ten percent, also an all-time low. The drought will cause a bump next year, but since the farmgate price of commodities is less than twenty percent of the retail price, the final impact will be far less than people assume.

11 posted on 08/11/2012 7:02:05 AM PDT by sphinx
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To: bandleader
Even during the Reagan years, it was pointed out that all the Sunday shows targeted at policy-wonks were sponsored by the likes of ADM.

Not to mention the wannabe pandering to the Iowa Cauci...

12 posted on 08/11/2012 7:45:59 AM PDT by Calvin Locke
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To: sphinx; Venturer
Sphinx, you're missing the point by assuming that we need an ethanol industry. (In fact, the ethanol industry needs government mandated behavior and across the board price increases just to exist.)

When we can no longer afford to buy OPEC oil because we refuse to exploit new finds and new technology in the US and Canada, nobody is going to be running engines & generators on corn alcohol.

And, Venturer; you left out the yearly carburetor rebuild and the "remove and drain the carb when you aren't planning to run it dry" ritual.

13 posted on 08/11/2012 8:42:35 AM PDT by norton
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To: jjotto
Ok, direct subsidies and tariffs died seven months ago. What's left is a mandate, which is simply a subsidy by another name. They removed the direct taxpayer subsidy and left the "mandate" which broadens the burden of the subsidy, a little.

I don't have an answer to your question, other than to note that the mandate creates an artificial demand for corn that would not normally exist. This tends to increase the price. It still makes no sense to burn a primary food crop in gas tanks when there is so much oil in the ground.

I bet you grow corn, don't you?

14 posted on 08/11/2012 8:43:40 AM PDT by Former Proud Canadian (Obamanomics-We don't need your stinking tar sands oil, we'll just grow algae.)
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To: Former Proud Canadian

No, I do not grow corn, and I do agree with dropping the ethanol mandate. It’s just that the arguments have to be accurate.

Government interference in ag markets is so pervasive that people have no idea how much food prices would increase under a true free market. We pay that price anyway by cost-shifting to government spending. But many FReepers denouncing ag programs would be demanding government controls if they paid the true food cost instead of taxes. And people would crave totalitarianism and rationing after a few years drought’s effect on food prices.

Anyone who can make an argument for choosing the lesser evil in Romney should accept the case for ag programs.

15 posted on 08/11/2012 9:03:13 AM PDT by jjotto ("Ya could look it up!")
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To: norton

On my Jet Ski it’s twice a year. I had it done the first of the season and it quit on me the other day and needs another rebuild.

I believe the insides of the gas lines have come apart and are stopping up the carbureter. This time I will replace the gas lines too.

16 posted on 08/11/2012 2:35:28 PM PDT by Venturer
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To: jjotto

Excellent and sensible post.

17 posted on 08/11/2012 7:55:01 PM PDT by 1010RD (First, Do No Harm)
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