July 24, 2012
The Great Drought: Unintended
Consequences?
As we all know by now our nation's corn
belt is experiencing the worst drought in over 50 years.
The likely result will be a massive
reduction in our corn harvest. This reduction in supply has simple
economic consequences...prices for every corn-based product will
increase dramatically. In addition to paying more for corn based
foods, we will, of course, pay more for ethanol too. One has to give
credit to the corn industry which for decades invented idea after
idea to increase demand and prices for their product. Corn-based food
product types have expanded for decades as more and more recipes were
developed that used corn, and high fructose corn syrup massively
replaced cane sugar. Then came the grandest idea of all; using corn
to create ethanol that could then be substituted for gasoline. Can't
you imagine these marketeers sitting around a table brainstorming
ideas on how to create even more demand for their product? After all,
in most capitalistic organizations, the quest for growth is an
absolute constant. Suddenly a light bulb went off and someone
reminded the group that the idea for producing a gasoline substitute
using corn ethanol had been around as long as the automobile. The
problem had always been that it cost more to produce ethanol than
gasoline and thus it could not compete on price. Then the group began
to think outside the box. What if, they asked, we could develop
traction for an idea of substituting ethanol for gasoline because of
global warming. We could certainly get the environmentalists to back
the idea. What if we also sold the idea as a way of helping reduce
our dependence on foreign oil? Then one excited person said...we can
even tout it as a source of renewable energy! Who could resist these
selling points? Then some really naive member raised a red flag; we
still have a problem because we cannot produce it at a price that is
lower than gasoline because it takes oil based fertilizers to raise
it, more oil-based energy to produce it, and then the corn has to be
hauled by trucks to distilleries and, finally, the ethanol also has
to be hauled by truck to the gasoline refineries because it is too
corrosive for pipelines. When all these costs are added up, the red
flag bearer warned, it clearly will never actually reduce oil usage
or pollution.. On top of that, this naysayer at the table said, the
start up costs will be very high. To all of this, the smartest person
at the table said; stop worrying so much about all of this stuff. Our
objective is to increase our corn markets and this is too good an
idea to pass up. We'll just turn those problems over to our lobbyists
and lawyers to deal with. Of course, here's what these two groups
then did; first, they had to get all of the lawmakers in the
corn-producing states to support a bill that would provide government
subsidies to get production distilleries built and running. Then they
had to promise to make major contributions to candidates for the
executive branch, and both houses of congress...for both parties.
Then they coordinated campaigns by environmentalists to bring extreme
pressure on the lawmakers. At the same time they launched media
campaigns to demonize the oil industry, and to sell the benefits to
American citizens in order to gain their support. By the time they
were done it would have been un-American to even think of speaking
out against this idea.
The idea was rapidly transformed from
an idea to a reality today that affects every American and even the
poorer inhabitants of the world who depend on our exported corn as a
food staple. Prices have, as would be expected, climbed steadily
higher. Corn crops have also grown commensurate with expanded demand.
Prices for even non-corn grains have also skyrocketed as farmers grew
less of these grains in order to convert to corn production. Our
leaders obviously did agree to this idea that they were paid to
support. Subsidies were created as requested by producers to help
build and operate distilleries that could not have existed otherwise.
And our leaders then convinced the EPA to now allow up to 15% of
ethanol in every gallon of gasoline.
Now we have the great drought! Guess
what will now happen to the prices of every grain-based product we
consume? Most experts predict that ethanol will soon end up costing
more per gallon than the gasoline it replaces, and in most states
it's not just EPA allowed...it's required (thanks to lobbying at the
state level). It leaves one to ponder just how much longer we will
allow this corruption to continue unabated. Once again, both party's
leaders, supposedly the smartest people around, have proven that they
will buy into and support almost any idea if they are paid enough to
do so. They clearly don't give a tinker's damn about what's truly
best for we the people!
Our leaders predictable response will
be that nobody can predict the weather because it is just an act of
nature. They used to say an act of God...but that is now politically
incorrect. Were the consequences unintended, unanticipated, or simply
ignored? Are our leaders stupid or crooked? Either should get you
fired.
These are my opinions. What do you
think?
Mike Tower
Hendersonville, NC
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