Tuesday, October 02, 2007

You can hear the drum...

The New York Times got the ag community in a snit with stories pointing out problems with ethanol and subsidies. First, a story about food aid to poor countries.
Soaring food prices, driven in part by demand for ethanol made from corn, have helped slash the amount of food aid the government buys to its lowest level in a decade, possibly resulting in more hungry people around the world this year.

The United States, the world’s dominant donor, has purchased less than half the amount of food aid this year that it did in 2000, according to new data from the Department of Agriculture.

“The people who are starving and have to rely on food aid, they will suffer,” Jean Ziegler, who reports to the United Nations on hunger and food issues, said in an interview this week. [More]

Then an analysis of the ethanol market.
But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.

“The end of the ethanol boom is possibly in sight and may already be here,” said Neil E. Harl, an economics professor emeritus at Iowa State University who lectures on ethanol and is a consultant for producers. “This is a dangerous time for people who are making investments.”

While generous government support is expected to keep the output of ethanol fuel growing, the poorly planned overexpansion of the industry raises questions about its ability to fulfill the hopes of President Bush and other policy makers to serve as a serious antidote to the nation’s heavy reliance on foreign oil. [More]
While some see these opinions as contradictory, I can't find the logical error. Subsidies/mandates have distorted our markets - ask cattle feeders. In fact, forcing the market to higher prices is what we were trying to do. The NYT, like a few of us in farm country simply don't care for our current farm subsidies.

The problem here is the messenger. The NYT is a liberal media bastion, and hence most industrial producers can't find anything to love, even when they have no counter arguments - which were sparse in the complaints I read. Supposedly, New Yorkers don't care about anybody in Iowa, for example. That's fair, but then there are very few Yankee fans in Des Moines either.

Plus they are all rich, aren't they? So we don't need any more reasons to not believe anything in the NYT. Only whether you like the NYT or not, they still get the facts right on more stuff more of the time than most other newspapers. Besides, even conservative papers like WSJ are down on mandates and subsidies. And the whole paper is now free online.

Plus we secretly do believe what they print, even as we rail against hearing the words out loud. The articles - if you bother to read them - are chock full of real numbers ad expert opinions. Including that notorious New Yorker, Neil Harl.

You can measure how factual the reports are. Notice over the next few weeks the increased urgency for a huge increase in the RFS (ethanol mandate) in the energy bill. Suddenly it's clear to even casual observers that ethanol could bleed red ink. Add in the number of "consolidators" hovering like angels of death over the ethanol industry (not my guess, but a fact pointed out by an economist who watches the industry).

The sound of the drumbeat for a legislative fix to the rigged ethanol market is growing. And I think corn growers will win again. Despite all arguments against ethanol, it seems to resonate with most people, and Congress agrees. So be worried if you need more anxiety, but I have finally learned to stay out of the way of the ethanol truck.


Anonymous said...

I thought our cheap food farm policies were causing the problems for third world ie small farmers not making a living and couldn't compete.

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