The Social Injustice of Corn Ethanol

By CFS

We all know that corn ethanol takes away resources from growing food, but by how much might astonish you.  According to author Alexis Madrigal in his book Powering the Dream, USDA statistics from 2010 show that fully 1/3 of the United States corn harvest went into our collective gas tanks.

That 1/3 of US corn production is akin to a subsidy for the wealthy.  You see, the more wealth and income a person has the more cars a person owns and consequently the more miles a person tends to drive (who wants to be on a bus with a bunch of stinky people), consuming proportionally more gas.  Conversely, the higher up the income scale one climbs the less a person spends on food as a proportion of their income.  The exact opposite is true of the lower-income scales, whome spend a much larger proportion of income simply feeding themselves and their families while spending less on transportation.  So, corn ethanol subsidies are essentially robbing from the poor and giving to the rich, a kind of reverse Robin Hood.

Bringing it down to the scale of Missoula, would you rather help out the people that live on the South Hills in Mansion Heights, or the people that live in doublewides in East Missoula?

Just how much is 1/3?  The US corn harvest in 2010 was 13.1 billion bushels.  Yes that is 13.1 with a B! A record-setting year in terms of acreage under production and yield even in the face of record grain prices.

So, fully 4.3 billion bushels of corn was converted into ethanol.  Those 4.3 billion bushels yielded 12.1 billion gallons of ethanol (based on my calculations from the ratio I derived thanks to this link) out of a total US supply of 13.2 billion gallons of ethanol which gives us 10% of the total gasoline supply.

That’s a lot of numbers… but bear with me.

So, to fill just 10% of our voracious appetite for fuel (18 million barrels of oil/day) uses roughly 26.4 million acres of American (Fuck Yeah!) farmland.  So while the addition of corn ethanol to our fuel supply hasn’t put much of a dent into American gas prices or our consumption of foreign oil, you can see in the chart below just how much biofuels have effected the price of corn.  The steep increase in price coincides nicely with the increase in total corn used for ethanol seen in the chart here (scroll down toward the bottom).

And also coincides nicely with the increase in the commodity price of beef.  Beef, it’s where most of the corn goes.

Obviously, the increase in price isn’t all due to increases in the amount of corn ethanol produced, but the pattern fits nicely together.  The real point of all these numbers I’ve thrown in front of you is to show the sheer scale of the impact that ethanol has on the food market (quite a lot) and the extent of the impact on the fuels market (almost non-existent).

In the end ethanol subsidies are part of the larger package of policies in this country that give breaks to those with an excessively disproportionate share of this country’s wealth.  These subsidies might not be that large in the scheme of things relating to our total budget deficit, but they are symptomatic of our larger cultural tendency to reward the rich and punish the poor.

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  1. Well, you’ve got it about half right. There’s little denying that ethanol subsidies punishes the poor more than they punishes the rich. But the rich are paying higher prices too. I don’t see how that’s as cultural issue beyond the real rewards of ethanol subsidies and mandates accruing to the likes of ADM, Cargill and corn farmers – which is a textbook example of special interests winning the rent-seeking game.

    There are enough reasons to criticize ethanol – not the least of which the total foolishness of burning food when there is an international food shortage – but casting this as more an issue of class than stupid policy seems pretty off-base. Think about the incentives you’ve outlined: Are the rich motivated to support this policy because prices are higher? That doesn’t pass the smell test.

    • Cafreestupidity

      Yes, the wealthy may also be paying higher food prices, but as I pointed out in my post, they don’t really notice the change because food is such a small proportion of what they spend their money on.

      If the price of ground beef increase by $2/Ibs, it’s not the wealthy that might be forced to stop buying beef and switch to dog food just to get by like a person living on a fixed income might have to do.

      All I’m pointing out is that this policy disproportionately benefits higher income Americans while at the same time damaging the ability of people of more meager means to feed themselves. That wasn’t the intent of the policy, but an unintended economic consequence.

      • But you’re argument is false. It doesn’t “benefit” anyone except the rent-seekers. As I said, there is no doubt that it disproportionally hurts the people of lesser means. But it still costs the rich more even if, at the margin, it doesn’t effect their lifestyles.

        • Cafreestupidity

          Taking tax receipts that mainly come from a tax on income (a regressive tax policy to begin with since the wealthy get a large proportion of their money from rent-seeking and ownership of capital) and subsidizing a product that lowers the cost of an activity (driving) that people with higher incomes take part in more than the poor would seem to be a benefit to me.

          http://www.card.iastate.edu/publications/DBS/PDFFiles/08wp467.pdf

        • Prove that it “lowers the cost” net of the increase in the cost of food and maybe you’ll have a point. But, as importantly, show me that ethanol has lowered the price of gas.

          I’m not going to get into the argument here about tax progressivity and wealth distribution. All I’m going to say is that you haven’t provided a logical argument. Look at the reciprocal you’re making: Subsidies disproportionately benefit the wealthy. But, if there is a benefit, which I doubt, they also benefit everyone else.

          But that’s not just true in this case. It’s true almost across the boards in our tax system. High income earners get a higher break on everything such as the mortgage deduction, tax breaks on hybrid cars, tax breaks on health insurance and medical expenses, etc. And short of getting rid of “tax expenditures” the more progressive the tax rate the more the subsidy skews to the wealthy.

          But, as I said, I don’t see any net benefit to the non-rent-seeking public in this policy. I’m sympathetic to your egalitarian sentiments (although I’m admittedly skeptical on utilitarian grounds) but I can’t see you’ve made the case here. Perhaps you can if you can show A) There is a net benefit to consumers and B) ethanol and its associate subsidies actually reduce the price of gas.

          • Cafreestupidity

            Read the link I provided. Or better yet, here Is a 2nd study that shows ethanol brought the price of gas down by between $.30-.40 per gallon.

            http://www.nrel.gov/analysis/pdfs/44517.pdf

            • the whole idea of using corn to produce fuel started somewhat benignly but very (in hindsight) naively in the seventies when sen mark hatfield (R) oregon and some doves combined with jimmy carter’s administration to fund studies and provide some subsidies for getting america away from using middle east oil and stay away from a cold war that was heating up with russia vis a vis israel and the arab world. of course, there is little threat now and politics have changed forever in this regard.

              of course inevitably converting fuel from corn failed because big oil made sure it did. it is a foolish subsidy and much too expensive both monetarily and ecologically compared to the benefits.

              only bringing america around to a less consumptive (by a factor of one half) energy use level would we ever get free of middle east oil.

            • How did big oil make corn ethanol too expensive?

          • OK, so you’ve given some linkage to a government agency whose major incentive is to rationalize their own existence. I suspect that there are far too many economic externalities for such a claim to be dispositive. But let’s assume you’re right for the sake of discussion.(although it would still benefit everyone who buys gas nonetheless.)

            Does the cost of reduced gas offset the increase in food costs?

            • Cafreestupidity

              Well since I haven’t conducted an extensive cost benefit analysis I wouldnt know.

              Though, I would make the additional point that while the benefits of the subsidies solely accrue to persons and corporations in the United States, the costs, in the form of higher food prices, fall on a large portion of the worlds population. Since the US is the worlds largest exporter of corn, any increase in ethanol production likely results inna decrease of exports, raising world prices.

              And that is exactly what has happened. While corn prices, acreade under production, and total production have beeen hitting record highs, exports have followed a downward trend since 2007.

              http://www.agmanager.info/livestock/marketing/graphs/Crops/Corn/USCornExports.htm

            • You’re not going to get an argument out of me on that. It’s bad policy that needs to be put our of our misery.

  2. If corn based ethanol came at no cost in hydrocarbons; if it were not subsidized; if it had no effect on the price and availability as food — it still would make little sense as an energy policy because we should be moving away from powering surface transportation with liquid fuels and toward powering it with electricity generated without hydrocarbons and liquid fuels.

    Our policy of growing corn for the fuel tank instead of the breakfast basket is an agricultural policy that makes political but not economic sense. There’s a place where those who support this nonsense can stick their corncobs.

  3. Turner

    Do you get more space to develop an idea when you log in or something? As a guest, I get shut down before I can develop a thought more or less fully.

    • Cafreestupidity

      I wouldn’t think so, though I have never tested it.

    • JC

      You shouldn’t have any less ability to post more substantive comments than anybody else. What exactly do you mean by “shut down”?

      • i believe using too many links will set off our spam filter. other than that, i am surprised if there is any difficulty. but i am just a bear and not real good with administrative things.

  4. Burning diesel fuel to make ethanol is just one part of the folly. While record flood events are spewing environmental pollutants into the Gulf of Mexico, irrigators are pumping aquifers dry in Arizona and threatening pristine fossil water supplies in the rest of the US. The winners are Monsanto, Dow, and Syngenta basking in the Koch-powered assault on the EPA.

  5. I’m not impressed with E85 fuel – I bought two tanks of it in Iowa this month, and as soon as I filled up the car my mileage started dropping.

    E85 was 30% less expensive, but I had a 25% drop in mileage.

    We’re subsidizing this ?

  6. Ingemar Johansson

    As a lib what’s not to like.

    ADM charges more for ethanol, which Dem EPA mandates must be in fuel, helping to further wreck the US economy.

    As a bonus your guys best bud Soros buys up a bunch of farmland thru his group Ospraie, mostly in midwest corn states.

  7. Powerfarmer

    The whole food vs fuel agruement is folly. When the corn is converted to ethanol, it doesn’t just disappear into you’re fuel tank, only the starch portion is used. The remainder is called distillers grain, a high protein animal feed. Also field corn is not like the corn you get in the store, on the cob or frozen or in the can. It has always been used as animal feed or used to make high fructose corn syrup, but even then part of it is still used for feed. The arise in beef prices have to do with the smallest herd in 40 years, increased exports to countries wanting better sources of protein and to higher fuel costs for shipping of the beef to stores. The commodity markets have been forced higher for corn, beef, wheat etc by speculators looking to make a fast buck and not by the fundamentals that underpin the market. These higher prices for beef and wheat here in Montana have helped keep the states budget in the black. Farmers and ranchers here spend money here that keeps the small town businesses open and supports local schools in tax funds.

  8. Powerfarmer

    The 550 hp truck that I use to haul grain the thirty miles to the elevator would have a hard time getting much done with an electric motor and battery bank. 550 hp = 405 kW Each load would use roughly 405 kWh of electricity, how many batteries would that take?

    The same goes for the tractor (350hp) that I seed with and the combine (250hp) I cut with.

    • “Each load would use roughly 405 kWh of electricity,” Only if the power level was at 405 kW for the entire trip. Would it be? And if so, how would Powerfarmer know?

      More to the point, whether Powerfarmer’s big truck can be powered by electricity is a red herring.

      That some surface transportation may need to be powered by liquid or gaseous fuels does not negate the wisdom of moving as much surface transportation as possible to non-hydrocarbon based electric power. Most forms of surface transportation can be electrified and we need to get moving on that now.

      As for field corn:

      Let field corn farmers plant their cornfields with photovoltaic arrays and windmills, thus eliminating that 30-mile haul to the elevator and the need for big trucks, tractors, and combines.

      In the meantime, let them, and the ethanol plants that buy their corn, operate entirely without any input of hydrocarbon energy. Let them replace their 550 hp diesels with engines that run on the ethanol they produce. That’s self-sufficiency, something Powerfarmer no doubt finds admirable.

      • Powerfarmer

        The truck runs at around 80% of the horsepower with the max occurring on several hills that use all of it. The electric power would be most inefficent at the elevator starting and stopping to move thru the line. I don’t disagree that some transportation could be electric but heavy loads unless it is at a constant speed doesn’t work. Trains use this method but it is constant speed still powered by diesel.

        The second part of your rebuttal shows how little you know about agriculture. The corn grown on these fields is completely used. To take acres away for solar arrays, would cause prices to rise. Windmills are put in place due to there smaller footprint but transmission lines need to be built to carry the power somewhere. Biodiesel made from soybeans or other oilseeds would be used in most farm equipment. the ethanol produced keeps money from leavinf the US and going to the mideast. Though I’m no fan of some of the companies (ADM) that are big in the ethanol industry, I’d rather keep some of that money here in the US then exporting the cash.

        Eliminating the tarriff on ethanol only transfers monet from the US to Brazil and doesn’t help America.

          • Powerfarmer

            Here in MT, camelina is the best bet. It is a nonfood crop, low input, low water use crop that doesn’t need special equipment. It also has some unique properties that make it better then other oilseeds.

        • Growing plants to convert to biodiesel (at a cost in natural gas) to fuel farm trucks we wouldn’t need if the land were put to a higher use than farming strikes me as pure folly. And wonderfully circular.

          But I am glad to encounter one farmer to complains that prices would rise were cornfields replaced with solar fields. I didn’t think the breed existed. Everything I knew about farming — which Powerfarmer will say isn’t much, as he disagrees with what I say — told me that no farmer ever found a crop price or subsidy too high. Now I know that at least one farmer, the guy with the big machines with big engines, is powerfarmin’ just to keep prices down. What a noble effort. I applaud. Perhaps he also rejects government subsidies, and grows only in the free, free, Milton Friedman, Austrian school (and Congressional Republican) market.

          • Diesel engines are here for the foreseeable future; wishing them away will not make it so. Sending 76 million acre feet of water polluted by those of us who live upstream into the Gulf of Mexico while pumping aquifers dry seems at least as foolish. Small hydropower and restoration of wetlands would take plenty of diesel fuel its own self. Let’s rewild the Missouri River from Three Forks to Omaha.

            President Obama gave Democrats our marching orders during this year’s State of the Union address. Tear out Canyon Ferry and Fort Peck and replace them with new generation technologies.




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