Monday, March 03, 2008

The problem with mandates (version 4.7)...

While you're smiling at corn prices today take a deep breath and ponder this:
Picture this hypothetical situation.

It is early 2009 and corn prices edge up to near $7 a bushel as U.S. ethanol plants and Asian traders bid for grain that is scarcer than expected after a disappointing 2008 harvest.

Responding to protests from U.S. consumers, the livestock industry and Asian customers, the new administrator of the Environmental Protection Agency, a Democrat, takes decisive action.

Using her broad authority under the 2007 energy bill, she waives the requirement that gasoline blenders use 11.1 billion gallons of corn ethanol in 2009. Unpopular as the action is in the Midwest, it breaks the corn price and eases inflationary pressures that are playing havoc with the U.S. economy.

Granted, it’s unlikely. The political consequences would be far reaching. Midwest voters still haven’t forgotten, or forgiven, Jimmy Carter’s 1979 grain embargo. And such dramatic action would scare off Wall Street investors needed to underwrite Washington’s huge bet on “advanced” biodiesel fuels.

But it isn’t entirely implausible, either.

American agriculture still hasn’t fully grasped the extent to which the energy bill shifted power over the farm economy to a corner of the executive branch where “production agriculture” has limited influence. In a Democratic administration attuned to the concerns of poor urban consumers and environmental groups, moderating food prices and protecting soil, water and air could take priority over hitting the ambitious biofuels targets in the energy bill. [More]
Ah yes, living and perishing by the sword of our own choice - the mandate.

While this possibility is pretty remote, I am not mentioning this for hysteria-engendering purposes, but to point out something I think is emerging as a huge responsibility for my farm and yours.

We can't have a small corn crop this year. And it won't matter if it's the fault of weather, either. After years of braying about how good we are and how everyone needs us, it is time to make good on those assertions.

This year we have to farm like the world depends on it.

3 comments:

Blubberball57 said...

A barrel of oil for a bushel of wheat...where have the good times gone?? Perhaps into the hands of the Speculators and traders.

Anonymous said...

John,

I think I just threw up in my mouth. This article highlights my concerns with the increasingly interventionist government. After reading The Forgotten Man by Amity Shlaes, I fear the effects of bad policy begetting bad policy, especially with twenty-eight years of pent-up intervening to do. Where is Milton Friedman when you need him?

John Phipps said...

Gentlemen:

Thanks for commenting. I'm not ready to being my "Alas, Babylon" wailing. But the ferocity of the markets when viewed from grain user's perspective will provoke some severe responses.

We can manage this, but the first step is to not be paralyzed by the action.

I'll post more later as I can - I'm in MI speaking at a casino with limited online access (gee - wonder why?)