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.
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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.
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