Tag Archives: corn

GOP Candidates Continue to Toss Money Down Cornhole

Gilligan-s-Island-Mr-and-Mrs-Howell-classic-television-revisited-3727152-435-326The really big difference between Republican and Democrat handout recipients is their ability to be sympathetically photogenic. When pressed, the average Democrat welfare recipient can hide the flat–screen TV, stash the cellphone in a drawer and refrain from cigarette smoking. And it’s not too much trouble to pretend to fill out the job application or limp convincingly to prove the bad back disability claim as long as photographers and media are around.

The Republican dependency class is another genus entirely. Empathy generating photo shoots and news coverage for these check–cashers is simply a non–starter. Hiding the Rolex, wheeling the executive jet inside the hangar, displacing the butler from the servant’s quarters and convincing the first wife to pretend to supervise the caterer is just too difficult to organize.

If Democrat welfare beneficiaries can avoid arrest, making jihad videos and Judge Judy the money continues to arrive completely free of social disapproval.

Not so for GOP crony capitalists. These leeches fight a two front war: Prevent competition and confuse conservatives. They are loud and proud “job creators,” economic mainstays and incubators of breakthrough technology! All the favored crony industry requires for total success is billions of taxpayer dollars in perpetuity while the people who supply the tax dollars maintain a discrete and respectful silence.

And Republican officeholders must pretend the conservative market principles they espouse in campaign commercials somehow don’t apply to this particular crony.

A disappointing number of 2016 GOP presidential candidates recently did just that in Iowa during the quadrennial Pour Money Down the Cornhole Festival otherwise known as the Iowa Ag Summit.

There Republican presidential candidates worship the ethanol subsidy and praise ethanol entrepreneurs for their selfless addiction to subsidies and environmental fairy tales.

The Renewable Fuel Standards law requires all gasoline refined in the US be 10 percent ethanol. Ethanol is the wonder product, made from corn, which makes gasoline more costly while reducing miles per gallon and increasing wear on internal combustion engines.

Diluting perfectly efficient gas with ethanol is like forcing mom to add sawdust to her cake recipe to protect our valuable flour stockpile. Sure the additional roughage keeps dad regular, but wear and tear on teeth and the occasional oven fire — not to mention that Home Depot flavor — doesn’t come close to compensating for the missing wheat.

The same is true for ethanol, all at a cost to taxpayers of $6 billion a year in handouts.

Somehow those facts didn’t make it into the spiel GOP mega contributor and summit sponsor Bruce Rastetter made.

Ethanol supporters would have one believe that before the bill was passed requiring refineries to dilute your gasoline, corn grew wild in Iowa and no one was even aware there was a use for the weed, other than the occasional frontier corn fritter. And even after wise agronomists in Washington started throwing money at corn farmers the fuel market was controlled by sinister forces that prevented innovation.

Just like the whale oil cartel prevented widespread drilling for oil until the early 60’s.

As columnist Paul Driessen wrote Rastetter’s pitch to the assembled candidates was pointed and effective: Failure to support ethanol handouts in Iowa means no victory in the 2016 caucus and no chance for the GOP nomination.

Naturally Big Government Republicans didn’t require much in the way of pressure to crumble. Jeb Bush said corny gasoline reduces the demand for imported oil. Mike Huckabee said it’s a way for the nation to “fuel itself.” (No pun intended.) And Lindsay Graham solemnly stated “Every gallon of ethanol … is one less gallon you have to buy from people who hate your guts,” which makes you wonder when Obama started pumping gas.

Rick Santorum, trying to get someone to pay attention, thought the RFS means something besides oil and natural gas “are allowed into [the energy] stream.” And Scott Walker was a profile in cowardice as he abandoned his 2006 call for an end to ethanol subsidies.

Rick Perry split the difference and wanted to end federal ethanol subsidies, but said that individual states could choose to be a foster parent for corn, which is at least a Constitutionally valid stance and would exempt most states that don’t grow corn and corn lobbyists.

The only candidates claiming to be conservative supporters of market competition and having the courage to tell Iowa voters the subsidy spigot should be turned off were Ted Cruz, Rand Paul and Marco Rubio — although Rubio did refer to corn as “maize.”

There’s an old song about moonshiners called “White Lightening” with a refrain that goes “Mighty, mighty pleasin’ my pappy’s corn squeezin’s.” Until Republicans can stop “pleasin’” crony capitalists with subsidies at the expense of the public, taxpayers will continue to be subject to regular “squeezin.”

The RFS Ethanol Mandate – and the Drought

A federal tax credit for ethanol, created more than 30 years ago, expired on Saturday, December 31, 2011. During the past more than 30 years, the federal government provided more than $20 billion in subsidies for the use of ethanol. Most U.S. ethanol is produced from corn.

That’s all well and good, but…subsidies (in the form of tax credits) for ethanol may have ended, but there is this little something called the “Renewable Fuel Standard” (RFS), created while George W. Bush was president, as part of the Energy Independence and Security Act (EISA) of 2007. The Obama Environmental Protection Agency (EPA), under administrator Lisa Jackson, has decided to continue it.

For further perspective, Aaron Smith, at The American, the online American Enterprise Institute magazine, on January 4, 2012, wrote:

So why did the powerful corn ethanol lobby let it expire without an apparent fight? The answer lies in legislation known as the Renewable Fuel Standard (RFS), which creates government-guaranteed demand that keeps corn prices high and generates massive farm profits. Removing the tax credit but keeping the RFS is like scraping a little frosting from the ethanol-boondoggle cake.

So the RFS takes up the profit slack lost when the ethanol tax credit subsidies were ended.

The “Standard” calls for the EPA to be “responsible for developing and implementing regulations to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel.” That means that farmers will continue to devote large quantities of land to Greenhouse Gas (GHG)-intensive corn, the kind used to make ethanol.

For comparison, in 2005 (before the mandate), corn was selling for $2 per bushel, and 1.6 billion bushels of corn, about 13 percent of the crop, was converted into ethanol. Today the price is over $8 per bushel, and the RFS mandate calls for over one third of the crop be converted into ethanol.

According to Aaron Smith, “The RFS mandates that at least 37 percent of the 2011-12 corn crop be converted to ethanol and blended with gasoline.” Smith continues: “The RFS mandate requires a massive quantity of corn to be converted to ethanol each year regardless of price or available supply.”

The Congress Budget Office (CBO), in July 2010, wrote, “… the scheduled increase in mandated volumes would require biofuels to be produced in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included.” Demand for corn-based ethanol is driven by the RFS mandate. The tax credit that expired at the end of 2011 hardly made a difference.

As Robert Brice at Slate writes, there is no doubt that the corn ethanol mandate is distorting the market. Most corn is used not as food for humans, but as livestock feed. That fact means that prices for human food, from milk to cheese to eggs to meat, will increase as a result of the RFS mandate. America’s corn to ethanol process now consumes about as much grain as all of the US’s livestock.

The U.S. is currently exporting large quantities of corn ethanol to, of all places, Brazil. Yes, that is the same Brazil that accepted money and technology for “environmentally responsible” oil exploration from the US, then signed contracts with China for the oil.

The RFS mandate is bad enough, but now farmers nationwide are feeling the effects of the drought. The USDA has yet again downgraded the condition of U.S. corn crop, saying that only 26 percent of it is in “good” or “excellent” condition, down from 31 percent the week before. Iowa farmer Chris Barron says his “corn and soybean crops will likely generate yields 7 percent to 10 percent below what he estimated” due to the fact that the Midwest has received about 0.94 inches of rainfall so far in June, or about 20 percent of the 30-year average for the month.

Colin Carter, a UC Davis agriculture economist, said, “The ethanol policy is a bad idea because the impacts of a drought are much more severe than it used to be.”

Drought concern started a Chicago Mercantile Exchange (CME) Group grain markets price rally, sending corn futures up over 60 percent since mid-June 2012, and the price per bushel as high as $8.20. As of August 7, 2012, Iowa was, according to the U.S. Drought Monitor, suffering from severe to extreme drought. Illinois, the second-most prolific corn-producing state after Iowa, was in extreme to exceptional drought. Moderate to exceptional drought also affected most of Missouri, Indiana, Kansas, and Nebraska.

A less than expected corn crop will leave supplies low, raising questions over the ability of the U.S. to keep pace with growing worldwide demand. Jason Britt, president of Central States Commodities, Inc., based in Kansas City, MO, said, “There’s ‘almost zero’ chance the corn crop achieves the USDA’s current nationwide yield forecast of 166 bushels an acre. Given drought damage, the crop probably will drop below 160 bushels an acre, and perhaps to the low- to mid-150s.” As Aaron Smith commented, “Low corn stockpiles place the worldwide market in a perilous position. If the 2012 US crop is even slightly smaller than expected, corn prices will rise even further and plunge millions more people into extreme poverty.”

Corn ethanol producers would reduce their use of corn in the ethanol process in response to higher food and feed prices (demand) if they were unconstrained by the RFS mandate (see Figure 3, page 35).

Several senators and representatives who represent livestock producers and dairy farmers are willing to suspend the corn portion of the mandate, but they want the cellulosic ethanol part of the mandate enforced. But there is one small problem with that idea: cellulosic ethanol does not exist.

Now we find that eight biofuels groups are forming a coalition to fight calls to limit a federal mandate for renewable fuels. The call to suspend the mandate is caused by the drought. Advanced Biofuels Association, Advanced Ethanol Council, Algal Biomass Organization, American Coalition for Ethanol, Biotechnology Industry Organization, Growth Energy, National Biodiesel Board, and Renewable Fuels Association make up the coalition.

Add to the above the problems caused by the transportation, storage, and use of ethanol, and there is the makings of a real catastrophe. Ethanol and gasoline-ethanol blends “cannot be transported by gasoline pipelines” because water in the pipelines causes the ethanol to separate from the gasoline. Ethanol must be transported by its own independent distribution system. It is blended with gasoline just before delivery to retail stations. And engine ignition is “more difficult in colder weather for vehicles running on fuels with high ethanol content” because of ethanol’s lower vapor pressure.

As Aaron Smith says, “It is time for the federal government to stop requiring cars to burn food.” But I suppose that the Obama EPA would rather continue its RFS mandate than tell the truth about fracking, or about Obama’s war on “Big Oil.”

And let’s not forget George W. Bush’s part in this situation. It was he, after all, who got the ball rolling.

But that’s just my opinion.

Please visit RWNO, my personal web site.

The Obama Effect

The following chart shows a comparison of prices of certain commodities from January, 2009 when Obama took office to the prices of the same commodities in January, 2011.

            Sourcing is footnoted.

            Leftist should take a lot of tranquilizers before reading this chart.

Just take this last item: In the last two years we have accumulated national debt at a rate more than 27 times as fast as during the rest of our entire nation’s history.  Over 27 times as fast. Metaphorically speaking, if you are driving in the right lane doing 65 MPH and a car rockets past you in the left lane.   27 times faster, it would be doing 1,755 MPH!

Sources:
(1) U.S. Energy Information Administration; (2) Wall Street Journal; (3) Bureau of Labor Statistics; (4) Census Bureau; (5) USDA; (6) U.S. Dept. Of Labor;
(7) FHFA; (8) Standard & Poor’s/Case-Shiller; (9) RealtyTrac; (10) Heritage Foundation and WSJ; (11) The Conference Board; (12) FDIC;
(13) Federal Reserve; (14) U.S. Treasury 

 

When Corn Prices Rise Our Government .. Regulates Food

Corn shortage causes prices to riseWelcome to Bazaaro-world – otherwise known as the United States with a liberal Congress.

A November 18th Bloomberg article illustrates what’s happening:

China’s State Council said on its website yesterday that price caps will be used on “important daily necessities” and production materials, if necessary. U.S. soybean inventories before next year’s harvest will be 30 percent less than forecast in October, and corn reserves may drop to the lowest since 1996, the U.S. Department of Agriculture said last week.

The Chinese are worried that we aren’t producing enough Soybeans and Corn to sustain their requirements.  Surprise, we aren’t producing enough to satisfy ours either.

Some believe that China, the world’s second largest corn producer behind the U.S. is a net exporter – no longer.  The Bloomberg report continues:

China became a net importer of corn this past year for the first time in 14 years, USDA data show. The nation will buy 57 million metric tons of soybeans in the marketing year that began Oct. 1, up 13 percent from the previous year, the USDA said Nov. 9.

China no longer produces enough corn to feed its own people.  There is no fall back position. How long until we can’t feed Americans any more?  We won’t have anyone to import from, so then what?  In Obama’s words costs, “..would necessarily skyrocket”.

By itself the huge climb in corn prices is alarming.  Many grocery items that we all rely on require corn or its derivatives -corn syrup, corn flour, corn meal, etc.  But that’s not the only thing that should have your alarm bells ringing.  Just as corn, soy and cotton prices have started to climb, our government has decided to act – to regulate food.

Senate bill 510 (S. 510) is the “FDA Food Safety Modernization Act”.  This bill seeks to update the “Federal Food, Drug, and Cosmetic Act”.  If passed, it would certainly update existing law, but the changes are disconcerting.

When first read, the bill appears harmless.  It’s only when read again, with the context of the global food crisis that things stick out.  Let’s take the wording of the very first two titles (emphasis mine):

TITLE I–IMPROVING CAPACITY TO PREVENT FOOD SAFETY PROBLEMS

TITLE II–IMPROVING CAPACITY TO DETECT AND RESPOND TO FOOD SAFETY PROBLEMS

Granted, the “capacity” statements seem to be around building larger government agencies and capabilities.  The question is why?  Are we expecting a sudden threat to our food supply or perhaps such a shortage that we will have to try to get corn, soy and other food stuffs from someplace else.

These first two sections certainly illustrate a known concern about our ability to produce enough food, the third .. nails it:

TITLE III–IMPROVING THE SAFETY OF IMPORTED FOOD

Digging into S. 510, the details are not comforting.  Title one contains registration section.  It forces even the smallest food producers to register with the government.  Why?  Why does the government care about someones cucumber and tomato garden if there are already plenty of cucumbers on the market.  Then again, what happens when there are no longer enough cucumbers?

There is no way to know if this is coincidence or happenstance.   Corn and Soy prices skyrocket and suddenly the Senate takes a cloture vote on legislation that is more than a year old.  This bill was introduced in March of 2009 and just sat there for 18 months.  Then food prices rise, the Chinese signal a shortage and the Senate thinks this bill needs attention.  Always the question – why?


Ethanol: What They Aren’t Telling You

Most information on Ethanol presents the corn-based fuel as a panacea for the worlds pollution woes, a green-jobs creator, and a needed boost to American farmers.  Digging into these claims brings some interesting data points to the surface.

The American Coalition for Ethanol touts ethanol as:

..a high octane, clean burning, American-made renewable fuel. Its production and use offer a myriad of benefits to the United States and its citizens.
The production of ethanol is an economic engine for the United States, adding value to U.S. agricultural products and bringing billions of dollars to the nation’s economy each year. The use of ethanol reduces harmful auto emissions, offers consumers a cost-effective choice at the pump, and decreases the amount of expensive crude oil needed to satisfy the nation’s thirst for transportation fuel.

Wow, sounds great doesn’t it, like the energy holy grail, until you dig into ethanol itself.  Examining the ethanol production process is somewhat revealing.

The number one crop used for Ethanol is corn. Uh-oh- now we have to divert corn to become our new Gasoline, but is there enough Corn?

The USDA Economic Research Service about corn:

  • Corn is the most widely produced feed grain in the United States, accounting for more than 90 percent of total value and production of feed grains.
  • Around 80 million acres of land are planted to corn, with the majority of the crop grown in the Heartland region.
  • Most of the crop is used as the main energy ingredient in livestock feed.
  • Corn is also processed into a multitude of food and industrial products including starch, sweeteners, corn oil, beverage and industrial alcohol, and fuel ethanol.
  • The United States is a major player in the world corn trade market, with approximately 20 percent of the corn crop exported to other countries.
  • ERS analyzes events in the domestic and global corn markets that influence supply, demand, trade, and prices.

That means that all of our corn is already in high demand in everything from Aspirin, to cereals, to livestock feed. If Ethanol replaced motor vehicle fuel, the principles of supply and demand would force almost all corn produced to be diverted to Ethanol production. This would skyrocket the price of all corn-dependent products including livestock fed from corn unless they find an alternative.

According to the Cato Institute in a January 2008 report titled “Food Fight” Ethanol has already had an affect on our economy.

The ethanol boom has knock-on effects in the rest of the rural economy. The growing use of cereals, sugar, oilseed and vegetable oils to produce ethanol and biodiesel is supporting crop prices and, indirectly through higher animal feed costs, raising costs for livestock production. As Table 1 shows, the prices for poultry, beef, and eggs have all increased by more than 5 percent this year. (Pork prices have risen relatively slowly because production has been very high compared to demand, although producers are expected to lower production during 2008 because of losses from low prices and higher feedcosts.[12]) Farmland prices in key corn-growing states such as Iowa, Nebraska, and South Dakota have increased by more than 20 percent in the last year.

So thats the economic impact, Choose between corn-dependent products or driving – you can’t afford to do both.

According to Elsa Steward in her article “What’s Wrong with Ethanol?” She points out that Ethanol by itself is not cost effective.

Ethanol is not likely to give us any relief from high gasoline prices. A gallon of gasoline produces about 1.5 times more energy as a gallon of ethanol. Because of this lower energy density, ethanol production and transport requires more production and transport capacity than gasoline. Ethanol also absorbs water, which is present in existing pipelines. Ethanol cannot be transported in these pipelines because the water would dilute the ethanol. The ethanol must therefore be carried over land by train or truck, a more expensive means of moving the ethanol from one place to another. Although the price of motor fuel sometimes increases due to problems with foreign and domestic oil supplies, the price of ethanol has historically been higher than gasoline prices and may remain higher for some time to come.

The Department of Energy’s Genomic Science Program

  • Can one gallon of ethanol displace one gallon of gasoline?
    • No. Ethanol has about 70% the energy content of gasoline per unit volume, so for every gallon of gasoline consumed, 1.4 gallons of ethanol would be needed to displace it. Ethanol, however, has a higher octane rating than gasoline — about 113 for ethanol compared to 87 for regular gasoline. The higher the octane rating, the better a fuel is at preventing engine “knocking” caused by inefficient fuel combustion. In other words, the higher-octane fuel provides better performance because it is used more efficiently to generate power rather than heat. If engines were optimized to take advantage of the higher octane rating of ethanol, they could achieve fuel economy more similar to that of gasoline engines.
  • Can ethanol be used by existing fuel-distribution infrastructure?
    • Ethanol and gasoline-ethanol blends cannot be transported by existing pipelines that carry gasoline. Water present in petroleum pipelines can pull ethanol out and cause ethanol-gasoline blends to separate into two phases. Ethanol must be transported by train, barge, or truck within an independent distribution system to ensure handling separate from the ethanol-production facility to distribution terminals, where ethanol is blended with gasoline just before delivery to retail stations.
  • Can ethanol be used in colder northern U.S. climates?
    • Due to ethanol’s lower vapor pressure, engine ignition is more difficult in colder weather for vehicles running on fuels with high ethanol content. During winter months, gasoline is added to E85 (85% ethanol and 15% gasoline blend) to make E70 (70% ethanol and 30% gasoline), which has a vapor pressure that improves starting in cold weather. Although current practice is to “blend-down” E85, the cold-start issue is a technologically solvable engineering problem for vehicle manufacturers.

I can’t afford a bowl of cereal, probably can’t afford to get very far in my car, if I’m up north, I can’t drive in the winter and ethanol has to be trucked in which means it burns more ethanol to get ethanol. But wait theres more. If you act now on this “Clean-Burning” fuel we will include free pollution with every purchase.

Oh gee did we leave that part out? So sorry, ethanol is not “clean burning” nor is the process to make it.

From Gas2.0

The Des Moines Register reported the other day that Iowa’s ethanol plants contribute 15 Percent — 7.6 million metric tons out of a total of 52 million metric tons — of greenhouse-gas emissions found in the state’s new inventory of major manufacturers, businesses and power plants
Iowa’s Department of Natural Resources found that the largest portion of the state’s overall emissions came from fermenting grain at the plants and not from burning natural gas or coal. In addition, burning biomass such as switchgrass at various industrial plants added another 0.13 million metric tons.

Uh-oh Ethanol production produces more greenhouse gas than coal plants, not very clean is it. Imagine the effect Cap & Trade would have on this industry. Lets just say you’ll be better off with a bicycle.

But I digress, lets look at the burning of Ethanol itself.

The Environmental Working Group (EWG) fought against the EPA granting Ethanol a Clean Air Act waiver for an increase from the 10% Ethanol Gasoline to increase from 15% to 50% (Note now its 10% Ethanol and 85% Ethanol) in May of 2009 due to, among other reasons, Ethanol production’s propensity to “degrade water quality, worsen emissions of some air pollutants and escalate health risks for children and other vulnerable people, according to scientific studies by the Department of Energy, Department of Transportation Pipeline and Hazardous Materials Safety Administration, National Research Council, independent academic researchers and EPA scientists”

An environmental watchdog group is telling us that increasing the amount of ethanol used will increase air pollution and lead to health risks based on Government studies, and yet its that same Government trying to force it upon us.

In short, widespread use of ethanol only creates more problems than it is supposed to solve. IIt is not the holy grail of green energy, if anything its more pollutive than standard fossil fuel use.

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