Elections have consequences, as the saying goes, and so do caucuses. Ever since the Iowa Caucuses began their rise (in 1972) to presidential-candidate-picking prominence, Iowa's interest in boosting the price of its leading crop, corn, has become American politicians' particular interest. Many a tax-cuttin' stalwart has pledged to keep corn-related subsidies flowing at taxpayer expense.
Come the summer of 2011, per-bushel corn prices (though they've been dropping recently) were head-high by the Fourth of July. Weather and market conditions affect any food commodity's price, but in this case there's an important external price-driver: ethanol.
Almost unbelievably, production of this transportation fuel now gobbles up four out of every 10 ears of corn produced in the United States. That extra demand for the crop not only raises the prices at American supermarkets, it helps price a food staple out of reach for millions of poor, hungry consumers around the world. And, because another four out of every 10 ears are used to feed animals, meat production costs rise along with those for corn flakes and corn syrup.
That's bad enough. But ethanol, both in its production and its use as a motor fuel, turns out to be a problematic product, as financier Steven Rattner argued convincingly in a New York Times piece on the opposite page last week.
Corn power isn't particularly popular with drivers, even in the inconspicuous form in which most motorists here buy it - blended in small quantities with gasoline. (The much more ethanol-intensive fuel known as E-85 is not widely available in North Carolina.) One reason ethanol hasn't much of a following is that a gallon of it doesn't go as far as gasoline does. Plus, the ethanol production cycle's overall efficiency and environmental advantages, if they exist, are slim.
About all you can say for ethanol is that it's American-made and renewable. Is that enough?
Considering the hefty taxpayer subsidies involved (and a corresponding tariff on imports of Brazilian ethanol, which derives from sugar cane and is produced much more efficiently), plus the inflationary effect on food prices, no, it's not.
Fortunately, Congress is beginning to come around - witness the Senate's move last month to end ethanol subsidies, in the form of refundable tax credits for refineries that blend ethanol with gasoline. The credits amount to 45 cents per gallon of ethanol. North Carolina Sens. Richard Burr and Kay Hagan, to their credit, were on the right side of that 73-27 vote. Rattner termed the action only symbolic, but Washington's enthusiasm for corn-based ethanol may be beginning to wane.
That seems to be the case in North Carolina too, where a flurry of ethanol-plant announcements a few years back yielded a thin crop of actual operations. In fact, the owners of what appears to be the state's only completed plant, in Raeford, announced earlier this year that they were a) halting production because of - get this - high corn prices and b) filing for bankruptcy protection, with hopes of reorganizing and reopening.
Certainly the United States needs to avoid being overly dependent on imported oil. And biofuels, of which ethanol is one, may eventually earn a prominent place in the nation's fuel mix. Research into more appropriate feedstocks for ethanol production should continue. But corn is the wrong crop to rely on, and subsidies that raise the price of food are not the way to go.
