Mullings An American Cyber Column By Rich Galen

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Corn!

Rich Galen

Monday May 2, 2011

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Everyone knows that the cost of food is going up; maybe as fast as the cost of gasoline. An article in the Wall Street Journal over the weekend focused on the cost of bacon.

According to the piece by Mary Kissel, "A pound of sliced bacon costs $4.54 today versus $3.59 two years ago and $3.16 a decade ago." That's in increase of almost 44 percent.

Kissel also reports that "Ground beef is $2.72, up from $2.27 in 2009 and $1.74 in 2001." Which is an increase of over 56 percent in 10 years.

The article focuses on C. Larry Pope, the CEO of Smithfield Foods, "the world's largest pork processor and hog producer by volume."

According to Pope the reason bacon has become so expensive - prohibitively expensive to many consumers - is because of the price of corn. "60 to 70 percent of the cost of raising a hog is tied up in "corn and � soybean meal," Pope says.

And feed corn "has gone from a base of $2.40 a bushel to today's price of $7.40 a bushel," nearly three times what it was.

Why? According to Pope a lot of it has to do with ethanol which is largely made from corn. Because of the Federal rules which mandate the amount of ethanol-mixed gasoline which must be sold in each state, "Now 40% of the corn crop is directed to ethanol, which equals the amount that's going into livestock food."

SIDEBAR

According to USA Today, "Sweet corn, the kind we eat on the cob, is less than 1% of total corn grown." The United States produces about 13 billion bushels of feed corn per year which leads the world," according to the USA Today piece.

END SIDEBAR

To be fair, "A third of that comes back into the food supply as distillers' grains, a by-product of ethanol production, which can be added to animal feed, bringing the total down to 24 percent."

Ethanol made from corn is not a particularly effective fuel. For example, a tankful of corn ethanol will not push an 18-wheeler. Only diesel and natural gas produce enough energy to do that.

According to a 2007 National Center for Policy Analysis report, a Chevrolet Tahoe running on gasoline will get about 21 miles per gallon on the highway. A Tahoe running on an E85 blend of 85 percent ethanol and 15 percent gasoline will get 15 mpg in highway driving - nearly 30 percent less.

In fact, ethanol is so inefficient that it is forbidden to be used in any aviation fuel.

Also, ethanol is not the magic elixir it was supposed to be in (a) cleaning up the atmosphere or (b) weaning Americans from petroleum-based fuels. The amount of water and fuel it takes to produce ethanol about balance the decrease in Carbon emissions ethanol-powered vehicles produce.

On the international front, a February article in USA today noted,

"For the 1.2 billion people [in the world] who make $1.25 or less a day and spend 50% to 80% of their income on food, price rises mean hunger and less money for education and health care, says Gawain Kripke of Oxfam America, an anti-poverty charity."

If you think riots in the Middle East and North Africa over a lack of democratic institutions have been brutal this year, wait until food riots begin to break out across the globe.

Politically, with corn and ethanol a big, big business in the American Midwest it is difficult for Senators and Members of Congress from those states to be anti-ethanol. Iowa, as an example, is known to be a pretty big corn producing state.

Republican candidates who favor maintaining the government's current position on ethanol while stumping for support in the Hawkeye state may well find themselves sideways with primary voters in New Hampshire, South Carolina, and Florida where meat and poultry production and consumption is a much bigger issue as prices continue to rise.

As a federal deficit driver, corn growers and ethanol producers receive subsidies amounting to about $6 billion per year. Smithfield's Pope claims,

"The subsidy has been out there since the 1970s. If they can't make themselves into a viable economic model in 40 years, haven't we demonstrated that this is an industry that shouldn't exist?"

It's time to take a good hard look at corn and decide whether the damage ethanol is creating outweighs the good which was promised.

On the Secret Decoder Ring today: Links to the WSJ, the USA Today, the NCPA and a primer on the history of ethanol. Also a nice Mullfoto from over the weekend and a Catchy Caption of the Day.

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