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Be Ready For Another Food Vs. Fuel Fight

 

Last week, corn futures prices approached levels not seen since June and July 2008, when nearby futures settled above $7.50/bu. With corn prices again approaching record highs, attacks on corn ethanol are soon to follow, as they did in 2008, when critics argued corn should be reserved to meet food demand, rather than fuel demands.

This year, corn growers should be ready for attacks against their industry with facts such as those recently posted online by Bob Stallman, President, American Farm Bureau. In the article “The Ethanol Question,” Stallman states, “Instead of pointing fingers at ethanol for increased corn prices, we need to look at what’s really driving demand – energy prices, weather-related issues and a growing global middle class.”

Indeed, one could better argue that it is our nation’s poor management of our access to global oil supplies – not the rise of corn ethanol as an industry – that is really driving the high price of energy, and therefore food. For more on information on the recent rise in oil prices, read the an article from Delta Farm Press and/or the Heritage Foundation.

When considering recent corn price spikes, also take a look at oil prices. During summer 2008, when corn prices were higher than they are now, oil prices were about $140/barrel. Currently, oil prices are rocketing past $100/barrel.

Stallman rightly states that the price for corn has always been based on its energy value, whether for food and feed, or for fuel. In his recent online article, Stallman cites statistics from 1996, prior to ethanol’s emergence as a market force, to show that corn prices will spike at high levels whether or not it’s being used for ethanol, based on stocks-to-use ratios and the laws of supply and demand.

When the incentives are in place, U.S. farmers always come through to produce more than enough to supply the needs, Stallman argues. “In short, we have expanded [corn] production in order to provide for not only more feed and industrial use of corn, but for nearly 10% of our nation’s automobile fuel supplies, as well,” he states.

What Stallman neglects to state is that whenever farmers produce more corn than the world demands, prices always go back down, often to levels that can be unprofitable to produce. Take away the right incentive (prices needed to make a profit) and corn production for both food and fuel will diminish.

For more information on ethanol facts, visit NCGA and/or the Corn & Soybean Digest.

 

Whether you agree or disagree about the need to defend corn growers in the food vs. fuel debate, I’d be happy to consider your opinion on the topic. When writing, please let me know your name, where you farm or work, what your comment is and whether or not I have permission to use your comment in a future Corn E-Digest newsletter. You can contact me (John Pocock) at: john.pocock@penton.com.

You're also welcome to write to me if you have concerns or questions about this newsletter or if you have ideas on topics you’d like to see me write about for future issues. I look forward to hearing from you.

TAGS: Corn
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