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As high as an elephant's eye

Corn harvests are breaking all records, as is the acreage devoted to it - and yet there isn't enough to supply demand, and corn-based food products are rising dramatically in price. Why? As Milton Friedman proved statistically, when you subsidize something, you get more of it.

This amounts to a tax on food to hand over to ethanol producers and major corn-growing corporations like Archer Daniels Midland, for little or no benefit to anyone else, as Rich Lowry notes at NRO:


"In some parts of the country," Jeff Goodell writes in Rolling Stone, "hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars." The higher cost of raising livestock is naturally passed along to consumers. So, with its ethanol mandate, Congress has effectively passed an indirect tax on food. The big winners are agricultural firms that have locked up lots of land, since the price of cropland has gone up 14 percent in the past year. (If your local real estate is slumping, it's only because you can't plant corn on it.)

This all might be worth it if ethanol were indeed a miracle fuel. Jerry Taylor of the free-market Cato Institute has demolished the extravagant claims made on its behalf. Even if we turned all corn production in the U.S. over to ethanol production, it would only displace about 12 percent of our gasoline consumption. It might even increase the proportion of oil we get from foreign sources; it will tend first to crowd out high-cost producers in the U.S. and Canada, not, say, the Saudis.


Read the rest at the link above. It's not even necessarily any benefit to the environment at all. Perhaps if they saved the cobs for Sheryl Crow . . .

For more on this subject from the environmental perspective, an article by Lester R. Brown.


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Comments (11)

Those of us who trade in t... (Below threshold)

Those of us who trade in the grain markets for a living have been discussing this issue for years but a hog farmer feeding candy bars instead of corn? Come on. I call bs on that Rolling Stone article. A bushel of corn weighs 55 lbs and at this minute corn for delivery next month costs $3.31 1/2 at the Chicago Board of Trade. Snickers bars cost $.75 each; who is that Rolling Stone guy writing to?

from the quoted article:<br... (Below threshold)
_Mike_:

from the quoted article:


It might even increase the proportion of oil we get from foreign sources; it will tend first to crowd out high-cost producers in the U.S. and Canada, not, say, the Saudis.

Interesting side effect.

When government mandates a 'solution' by fiat, could that mandate actually serve to prolong the long term problem - by producing artificially* lower prices thereby inhibiting the flow of capital towards research in 'better' solutions ?

*I say artificially because the government mandate for ethanol, combined with a government subsidy of corn is not the market reacting to a better solution but government manipulation of the market.

I can't imagine anyone purc... (Below threshold)
_Mike_:

I can't imagine anyone purchasing Snickers at the local convenience store to feed to their hogs... but out of date goods ? Eh, maybe.

Given that the RS author referred to the feed as 'trail mix' makes me doubt his credibility. It a'int trail mix, boy - it's slop.

And the LAw of Unintended C... (Below threshold)
JLawson:

And the LAw of Unintended Consequences raises it's head again. Sooner or later, we'll realize that a changein one portion of the economy (taking out corn to turn it into ethanol) will cause a change elsewhere (price of corn rising for food) with other effects down the line.

Yeah, they meant well when they went for corn-based ethanol, but they didn't think things through... as usual.

As Milton Friedman... (Below threshold)
Gizmo:
As Milton Friedman proved statistically, when you subsidize something, you get more of it.
Or as P.J. O'Rouke likes to say: "Show me a government program that offers free milk, and I'll show you a program that breeds kittens!"
The sad part is that we are... (Below threshold)

The sad part is that we are banning imported ethanol made from sugar cane and other products - apparently because they don't benefit ADM.

El Rider ~ I suspect the sort of candy bars being used for hog feed aren't those bought at retail, but those returned unsold due to expiration, damage, etc.

A few years back, hog farmers would contract to buy the garbage from cafeterias and restaurants for feed, but that practice has since been outlawed in most states, I believe.

There are other "unintended... (Below threshold)

There are other "unintended consequences" as well. Corn destroys arable topsoil forcing more use of nitrogens that are seeping into ground water and rivers. Not to mention some genetically enhanced corn that's destroying necessary insects like bees.

In my opinion, the increase... (Below threshold)
P. Bunyan:

In my opinion, the increase in federal subsidies for ethanol has been the single biggest failure (or mistake) of Bush's presidency.

(Of course I don't care much about the illegal allien issue, which many non-socialists would rank as #1)

P. Bunyan, it's got competi... (Below threshold)
C-C-G Author Profile Page:

P. Bunyan, it's got competition with No Child Left Behind, the Medicare prescription boondoggle, and such stellar nominees as Harriet Miers. And of course there's the amnesty... er... pardon me, "immigration" kerfuffle.

Bush has had some good points, but he's also tripped up many times, alas.

Medicare prescript... (Below threshold)
Medicare prescription boondoggle

The ONE good thing about that is after years and years and years of democratics talking about how they would deliver that entitlement, and never did, then Bush came in and did it.

Not that I agree with him doing it, but it was rather fun to watch the "caring, guardians of the little people" never deliver, then the big, bad, hateful, hates everyone Republican President delivers it.

Naturally, the complaint from the democratics was that it wasn't big enough.

Cain't we just use caribou ... (Below threshold)
bobdog:

Cain't we just use caribou from the North Slope for fuel somehow?




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