Corn Commentary

Professor Takes on Walter Williams

Earlier, we provided a dissection of a column by Walter Williams. Another view on the matter is provided here, by Professor Bruce Dale of Michigan State University:

Mr. William’s piece is so full of mistakes that I will probably run out of space before I correct them all. First, all water is removed from ethanol before it is shipped. All cars sold in the U.S. for the last 20 plus years have been able to run just fine on 10% ethanol/90% gasoline. We are now producing hundreds of thousands of “flex-fuel” vehicles per year that can use either gasoline or mixtures of ethanol and gasoline up to 85% ethanol. With some management, ethanol can be shipped in existing pipelines. Very little U.S. corn (about 10%) is fed directly to people; most of it is fed to animals. About one third of the corn converted to ethanol remains behind as a high protein animal feed called distillers grains. Coal and natural gas energy equal to about 70% of the energy in ethanol is required to produce corn ethanol. For cellulosic ethanol (ethanol made from grasses, wood chips, crop wastes, etc.) no net coal or natural gas energy will be required to produce the ethanol. The ethanol blenders credit of $0.51 per gallon cost taxpayers about $3 billion last year, but it reduced crop price supports by about $6 billion and our oil import bill by another $15 billion. It is virtually certain that some of that $15 billion for oil would have gotten into the hands of those who hate America and her people.

As an economist, Mr. Williams ought to know that many factors contribute to rising grain prices: rising wealth and demand in China and India, drought in Australia, and increased ethanol demand all play a role. But that $3 box of corn flakes on our shelves contains about 5 cents worth of corn. Even if corn prices double, the price of grain has a small impact on food prices. Rising energy prices have a much greater impact. Eighty percent of the poorest people in the world are farmers or live in rural areas. Increased grain prices benefit these very poor people and give them more wealth with which to solve their problems. The African farmer especially needs the increased income and agricultural productivity that come with rising grain prices.

Mr. Williams does not like government intervention in markets. I happen to agree with him. Our greatest current market intervention is probably the $50 billion per year (minimum) in military expenditures to keep oil flowing from the Mideast. But we surely aren’t getting cheaper oil in return. Ethanol from corn and later the cellulosic ethanol that will come in much larger volumes will help end our oil addiction, give us cheaper and cleaner fuels and will also promote freer and more stable energy markets.