Written by Vincent Giola
Will ethanol enthusiasts have to give up reading?
April 5, 2008
Op-Ed By Vincent Gioia
Corn prices have soared to $6.00 a bushel, an increase of over 30% in just the first four months of this year. The usual reason for high prices apply, demand exceeds the supply. Being businessmen, farmers have naturally switched much of their acreage to growing corn but though this has not stopped the pressure to drive up corn prices, it has had the effect of the rising prices of many, many other products purchased by families across the globe.
To show how astute experts are, Elaine Kub a grains analyst with DTN in Omaha, Nebraska, said "It's a demand-driven market and we may not be planting enough acres to supply demand, so that adds to the bullishness of corn". To that sage comment, I might say "duh?"
The only problem with planting still more corn is that it will exacerbate price increases of those products made from corn or otherwise relying on corn for food production, such as livestock whose principal diet is corn. Furthermore, even if all available acreage was devoted to corn production it still would not enable the country to produce all ethanol mandated by inane climate control laws enacted by federal and state governments for use in the transportation industry.
Record prices enjoyed by corn farmers, most of whom are huge agriculture conglomerates not mom and pop farmers, also result in record profits at the expense of higher grocery bills. Livestock producers pass along higher animal feed costs to consumers so those buying beef and pork will find summer barbeques will be more expensive.
But the "trickle up" result of high corn prices does not stop at protein in our diet; it will also affect our collective "sweet tooth". Corn syrup is used in everything from candy to soft drinks.
So what is the plus side of the ethanol craze; absolutely nothing. It has been established that ethanol is far less efficient as a vehicle fuel than gasoline or diesel and ethanol would not be commercially viable as a partial replacement for gasoline usage without the government subsidy of over $0.50 per gallon. Even so it is reported that current price of ethanol is above $2.50 per gallon.
There are an estimated 147 ethanol plants in the country having a capacity to produce about 8.5 billion gallons a year. Motor fuel requirements are over 150 billion gallons a year and if all gas stations sold "E-85" (a fuel blend with 85% ethanol and 15% gasoline) we would need over 127.5 billion gallons of ethanol to fuel vehicles in this country; imagine if you can how this would affect food prices around the world.
Of course gas stations would all have to make E-85 available to motorists; right now, for example, there is only one station in southern California (in San Diego) that has E-85 available for fools that don't mind damaging their vehicle engines to buy (using ethanol in engines not adapted to use such fuels causes severe engine damage).
It has been reported that 20% of last year's crop of 13 billion bushels of corn was used in ethanol production and that in the year ending August, 2009, this amount will increase to 30% for ethanol production. Consumers in the United States will be able to track the increasing allotment of acreage to supply corn for ethanol by the increase in what they pay at the supermarkets to feed their families.