Yesterday, the USDA reported that the average farm price for corn in the 2012/2013 season is projected to rise sharply from $4.20-$5.00 a bushel to $5.40-$6.40 due to the extreme heat and drought across corn country that has been wreaking havoc on crop production. For Americans, it means we can expect to see higher food prices coming to a store near you. Higher prices won't just be on ears of corn, but on all other products that depend on corn. The price of meat, milk, cereal, candy, and other food will all be impacted.
Meanwhile, in the Sahel region of West Africa, as many as 17 million people are now at risk in a food crisis that stems from crop failure, drought and high food prices. In The Gambia alone, skyrocketing food prices mean an estimated 700,000 people are going hungry. The U.S. is the largest exporter of corn in the world, but the latest USDA estimates are that we will be exporting 300 million fewer bushels due to tight supply and higher prices.
What is the hidden ingredient in rising corn prices?
In a nutshell, the answer is corn ethanol. While biofuels are not the only thing driving up corn prices, here's why it is an important factor:
Due to a cocktail of government incentives, we are already diverting almost half of our corn crop to ethanol for our cars.
This year the U.S. will turn five billion bushels of corn into ethanol. That's enough food to feed 412 million people for an entire year.
Earlier this year, the USDA boasted the largest corn planting in history and corn producers thought they might be able to meet rising corn demand for food, feed and fuel with the bumper crop. Yet the long and hot summer in the United States, with record-breaking temperatures and extended periods of drought, has been burning up the corn in the Midwest.
Basic economic principles show us that, inevitably, when supply diminishes and demand rises, prices will increase. The last several years have shown that extreme weather events ranging from floods to droughts to tornadoes have dampened supply. Climate change is only likely to make this erratic weather the new norm. Good policy shouldn't depend on prayers for good weather. Instead, to relieve the supply and demand challenge, we should ease pressure on our corn crop and remove any artificial government mandates for corn ethanol.
Proponents of ethanol often argue that crops used for fuel are different than the ones we eat. Let's not get confused here. Regardless of the type of corn crop that is grown, the common denominator remains the need for land and an adequate climate to grow crops. The problem is the diversion of land to fuel crops from food crops. It is not the farmer's fault. They grow what they can sell in the market for a good price -- and both producers and consumers deserve fair prices. But government mandates have created the market for ethanol encouraging producers to focus on feed corn for ethanol instead of for animal consumption -- which ultimately becomes food in the form of meat, dairy and eggs. In sum, corn ethanol means more demand on the land and less land for food.
It's not just a theoretical concern either. The U.S. controls more than half of the corn export market, so the tight corn supply and growing demand has been pushing up prices at home and even more significantly abroad. ActionAid's recent report "Biofueling Hunger" shows how the diversion of food to fuel has caused an increase in global food prices by using the example of Mexico. The cost of corn tortillas, a staple food in the country, has risen nearly 70 percent as a direct result of ethanol mandates in the United States. Five million children did not have enough to eat in Mexico last year.
We can't control the weather, but we can control the demand on corn. It's time for the United States to either drop government incentives for corn ethanol or at least make the mandate more flexible so that in times of tight supply we are able to waive down the artificial demand.
Watch ActionAid's video "What's Lurking in Your Taco" to find out more about the hidden ingredient in rising food prices. You can take action to prevent this by sharing this video and graphic on Facebook and Twitter to make it known that biofuels are not a sustainable solution to the world's energy problems.
Mat 24:4 And in answer Jesus said to them: “Look out that nobody misleads YOU; 5 for many will come on the basis of my name, saying, ‘I am the Christ,’ and will mislead many. 6 YOU are going to hear of wars and reports of wars; see that YOU are not terrified. For these things must take place, but the end is not yet.
7 “For nation will rise against nation and kingdom against kingdom, and there will be food shortages and earthquakes in one place after another. 8 All these things are a beginning of pangs of distress.
Rev 6:5 And when he opened the third seal, I heard the third living creature say: “Come!” And I saw, and, look! a black horse; and the one seated upon it had a pair of scales in his hand. 6 And I heard a voice as if in the midst of the four living creatures say: “A quart of wheat for a de·nar′i·us, and three quarts of barley for a de·nar′i·us; and do not harm the olive oil and the wine.”
(High food prices)
I like the idea of the black horse: maybe those banksters will get what they have coming to them.
However, the author of this article shows her true biased colors by saying that "almost half" of the corn crop goes to ethanol. No mention at all about DDGs that make the real displacement closer to 25%. That kind of stuff makes me so disappointed. This author clearly has no interest in providing a fair and balanced article and it is basically just a political piece and should be regarded as such.
Four Ways the Farm Bill Contradicts Itself (Civil Eats) 4/5/2012: http://civileats.com/2012/04/05/four-ways-the-farm-bill-contradicts-itself/
Who benefits?
Take a look at who joins the American Coalition for Ethanol (ACE)--members are "secret" but you can see who joins. If we could see, I would expect ADM, Koch Bros.,Cargill et al:
http://www.ethanol.org/index.php?id=23&parentid=7
The last I checked, the U.S. could use the jobs. So much so that GM was bailed out, but I didn't see anyone on here whine about that. But when it comes to helping our farmers, look out.
First, this allows our companies to undercut farmers all around the world, which keeps them from being able to compete on the world market.
Second, this has produced such a glut of corn that we are not only making it into alcohol, but burning it in furnaces to produce heat.
Third, this has encouraged the growth of factory farms and feed lots where animals are fed a very unhealthy and fattening diet of corn. Corn fed cattle carry the pathological form of E. coli in their guts. Grass fed cattle do not.
Fourth, this has resulted in the industry finding ways to shove corn into everything we eat. Corn syrup has replaced sugar in soft drinks and many other products. It has also been incorporated into many foods that never had sugar in them.
The first thing we need to do is to get rid of all the farm subsidies so that the cost of food represents the actual costs of the product on the free market.
And if you are referring to the ethanol tax credit, that expired at the end of the year and until the drought happened, ethanol was continuing to be made at less than the cost of gasoline.
As for exports to developing countries, we would be doing them a favor not shipping our GMO'd frankencorn. The dumping of US government subsidized corn in these markets interferes with local food production anyway. Less US corn means better income for local farmers.
There is enough food now to feed the whole world but poor people cannot afford to buy it. And the high cost of food is as much due to speculation on food product futures by the financial world as drought
• Seed 24.30 million bushels
• Cereals & Other Products 200.70 million bushels
• Glucose and Dextrose 300.00 million bushels
• Starch 250.00 million bushels
• Alcohol for beverages & manufacturing 135.00 million bushels
• High fructose corn syrup 495.00 million bushels
• Alcohol for fuel 5.050 billion bushels
• Feed and Residual 4.550 billion bushels
• Exports 1.650 billion bushels
What Is the Total U.S. Corn Supply in 2011/12**?
• Total U.S. Corn Supply (MY 2011/12) 13.508 billion bushels
• Total U.S. Corn Use in MY 2011/12 12.605 billion bushels
• Ending stocks (inventory on 8/31/12) 903.00 million bushels
Sources: *USDA-ERS June 2012 Corn Food, Seed, Industrial Use-Table 31**USDA July 11 2012 WASDE
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Lush added, “According to the USDA National Agricultural Statistics Service the retail price paid at the grocery store for an 18 ounce box of cereal, such as corn flakes in May 2012, was $4.19. The farmer’s share of that $4.19 box of cereal was only $.09 or about 2%. Even with stronger corn prices the farmer still only gets about 2% of the retail price paid by consumers for the relatively small amount of the U.S. corn supply that goes to cereal products. Who gets $4.10 of that $4.19 price paid by consumers for that box of cereal? According to USDA, off farm costs including marketing, processing, wholesaling, distribution and retailing account for 80 cents of every food dollar spent in the United States. It’s not the price of corn causing grocery prices to go up.”
http://en.wikipedia.org/wiki/Energy_Independence_and_Security_Act_of_2007
A quick calculation of interest. For US only, corn demand into food uses, including feed for livestock is about 170 mln metric tons per year. Prior to ~2005, corn prices averaged roughly $120 per metric ton. Corn prices today are up to $300 per metric ton. Looking just at the US then, there has been a $20 bln impact to consumers. The US has about 40% of the global consumption, so the total global impact is roughly $50 bln. And that's just corn. It doesn't include all the other food crops that have also been impacted.
There is even some additive that the EPA want the fuel companies to use in the gasoline and are fining them for using it. Just one problem it has been made yet, apparently it cannot be produced in any quantity. But the EPA says tuff, you are fined. Great outfit.
Indeed, corn-based ethanol does very little to nothing in reducing GHG. Ethanol has a higher vapor pressure than gasoline, so evaporative emissions are greater. And, ethanol has significantly less energy content. So, everyone has been been paying as much or more for gasoline, but gets less mileage. You are correct, that sugar cane ethanol is a much better choice, as it does reduce net GHG production.
But, don't forget the author's point -- that by mandating the use of renewable fuels, the governemnt has effectively caused the world to pay much higher prices for food.