Saturday, June 30, 2007

Last week the University of Flyovercountry received a 100 million dollar plus grant from the Dept of Energy to research turning biomass into energy. While I'm always happy to see the rare occasion of Federal tax dollars flowing back to Flyovercountry, I have reservations about the rush to generate energy from Ag products. There is a cascade of effects from this that seem to be overlooked by many involved.
The first problem is the same as the rush to drill in Alaska and the Gulf, it tends to obscure the fact that conservation is far more effective in reducing dependence on foreign oil imports.
Far more troubling is the disruption in the food market. The US is used to a surplus of low priced food products and this has helped to keep inflation low. The enormous shift of corn to fuel production has done almost nothing to lower fuel costs, but has already raised the price of corn markedly. Don't think that this means sweet corn is now a buck an ear. (Bad old Flyovercountry pun) This mean beef is more expensive (corn fed). This means chicken is more expensive(corn fed again). Almost any processed food you eat used corn sweeteners. I think I'll have refreshing soft drink and ponder this, oops corn sweeteners again.
The one plus should be that farmers are making a lot more, but Ag prices are not set like other products in this world. Farmers can not sit on their products and sell to the highest bidder. Ag prices are set in the commodity markets. Markets controlled by the huge Ag mega- businesses like Acrcher-Daniels-Midland. The farmer sees little of the increase and loses most of the gains to the huge increase in fuel and fertilizer prices. (Fertilizer is made from oil!)
The final cascade effect I worry about, is the trend of these Ag businesses to use food as an economic tool. NAFTA has allowed these companies to flood Mexico with corn grown in the US. This flood has caused many local Mexican farmers to quit growing corn and leaving them with no alternative crop. The loss of farm related jobs increases the immigrant pressure in the US. Within the last year corn prices in Mexico have risen to the point that poor people are unable to afford tortillas. This does not mean no "Taco Tuesday". This means children go hungry! The Mexican government has had to subsidize tortilla prices.
The bottom line here is that people need to examine the effects of simple or easy solutions to dificult problems.

No comments: