Corn Commentary

Great Minds (?) Think Alike

Back on April 7, Michael Ramirez of Investor’s Business Daily won the Pulitzer Prize for Editorial Cartoons. Among the works in his portfolio was this:

Interestingly, the St. Louis Post-Dispatch ran this cartoon in today’s paper:

The similarities are striking. The logic is grievously flawed. There’s little to no connection between ethanol and food supply or prices. Read these reports for more information:

USDA: Corn Prices Near Record High, But What About Food Costs?

Federal Reserve Bank of Kansas City: What is Driving Food Price Inflation?

Texas A&M University’s Agricultural and Food Policy Center: The Effects of Ethanol on Texas Food and Feed

Everything Causing Higher Food Prices

Don’t miss this post on CNET’s Green Tech Blog. Author Michael Kanellos gets it mostly right and the comments are very pro-agriculture.

The lead sentence says it all:

What’s causing the global rise in food prices? Everything.

Finally – somebody really GETS it! Kanellos continues:

Growing demand for food in emerging nations, wheat crop failures, currency fluctuation, speculation in the commodities market, hastily conceived government policies, and the growing demand for biofuels have all–among other factors–converged to drive up the price of food, experts say.

I read something similar on Wikipedia under the entry “2007-2008 world food price crisis.”

Analysts have explained the prices rises as a “perfect storm” of poor harvests in various parts of the world, lower food reserves, growing consumer demand in China and India, global population rises, and changes in the global economy.

Could it be that people are starting to understand? Let’s hope so. Now, let’s stop calling this a CRISIS. Why does everything have to be a crisis? Chances are, no matter what the Wall Street Journal says, this is a temporary situation.

Sometimes the media seems like a teenager. Everything is a crisis and each new crisis is the way it will always be, nothing will change, it will just get worse.

Yet, as we grow older and (hopefully) more mature, we usually learn – this too shall pass.

Food Price Inflation in the ’90s

As crude oil futures rose to a record high near $114 a barrel in trading on Tuesday at the New York Mercantile Exchange, some news reports continue to focus on higher corn prices as the culprit for increased food prices.

But, some of the message seems to be getting through. Many of the reports I have been reading lately have mentioned energy prices first as the cause of higher food prices, which they like to say are experiencing the “biggest increase in 17 years.”

That was 1990, when food price inflation was 5.3 percent.

Food GraphIf you want to read something really interesting, check out Food Marketing Costs – a 1990s Retrospective from USDA’s Economic Research Service. According to that report, consumers spent $618.4 billion on food in 1999, up 37 percent from the $449.8 billion spent in 1990. Seems like a pretty big jump for a decade.

But, if you dig deeper to find out the drivers for that increase, you find that the farm value of commodities only increased 13 percent between 1980 and 1999. On a graph, it looks almost flat. By contrast, the “marketing bill” as the economist call it, literally skyrocketed, up 45 percent, mainly due to increased consumer demand for convenience. Labor costs were up 56 percent, packaging up 39 percent, fuels and electricity up 43 percent, rent up 72 percent – but here’s the biggie – corporate profits up 98 percent!

Think about that the next time you hear the Grocery Manufacturers Association (which happens to represent the world’s leading food, beverage and consumer products companies) complain that corn for ethanol is making food prices higher.

Response to Saudi Criticism of Ethanol

During an appearance in Paris last week, Minister Ali bin Ibrahim Al-Naimi said, “Let’s be realistic, ethanol and biofuels will not contribute to the protection of the global environment by reducing (carbon dioxide) emissions, they will not increase energy security, nor will they reduce dependency on fossil fuels to any appreciable degree.”

Minister Al-Naimi“Their cultivation eats into the human food supply, reduces the absorption of carbon dioxide as forests are cut down, has not improved the security of energy supply and has not reduced petrol prices,” he added. Biofuels also enjoy “financial favoritism” from governments.

Renewable Fuels Association president Bob Dinneen justifiably jumped on those remarks and fired off a letter to the minister.

“For the Saudi Oil Minister to assert that biofuels are not an effective energy alternative is no different from the wolf complaining that Little Red Riding Hood was interrupting his dinner plans,” Dinneen wrote. “As a leader of a country that opposes strict limits on carbon emissions and favors continued expansion of petroleum production, it is not surprising that you express opposition to the development of biofuels.”

“What is also galling about your statement is the claim that biofuels negatively impact the ‘food market.’ The evidence demonstrates that the number one negative impact on the food market is the high price of your primary export – oil,” Dinneen continues. “One hundred dollar per barrel oil has driven up the cost of everything from fertilizer to diesel oil used to transport food, to plastics used in food packaging.”

Read Dinneen’s full letter here.

Big Oil Spill, Aisle Seven …

The Grocery Manufacturers Association has been attacking corn and ethanol lately, and one can wonder why. After all, corn and other farm inputs are only a small part of the retail food dollar. High energy costs have a much greater impact on what we pay at the grocery store checkout.

Why, then, does the GMA work openly hand-in-hand with Big Oil to knock us around?

Visit the GMA Web site here (www.gmabrands.com) and see for yourself. Click on the link that reads Public Policy … then on Energy.

Notice something odd? Look at the address bar on your Web browser. You have (quietly) switched over from www.gmabrands.com to a page on www.bipac.net.

All the GMA information on energy comes from BIPAC, which is the Business Industry Political Action Committee. And who runs this group?

Well, here’s the board of directors. A lot of executives from companies like Sinclair, Occidental, Exxon Mobil, Diamond Oil.

On the other hand, there’s not much to disagree with regarding the “official” GMA line on biofuels:

GMA supports the goal of reducing reliance on fossil fuels and believes that biofuels can play an important role. GMA supports the development of sustainable and energy efficient fuel alternatives in a market-based environment. We also support policies that ensure that the country can increase biofuels production without impacting the food industry’s ability to continue to provide reliable and affordable food to the nation and other markets.

Except, of course, the way they interpret the last line. U.S. corn growers have been providing reliable and affordable food for generations … before there was a GMA or a BIPAC.

Columnist Says a Mouthful

Columnist Alan Guebert says a mouthful about food prices in a column this week entitled “Don’t Complain With a Full Mouth.”

Alan GuebertGuebert details how the late former Agriculture Secretary Earl Butz used a loaf of bread as a visual aid to demonstrate the farmer’s share of the food dollar.

“Farmers don’t set the price of food,” Old Fencerow to Fencerow would proclaim as he unwrapped the bread before an audience. “The market does.”

He’d then move the loaf, slice by slice, from one side of the podium to the other to illustrate what each step of the breadmaking process – flour milling, baking, packaging, transportation, wholesaling, advertising, retailing, labor – cost.

Finally, with just one piece of the loaf remaining, Butz would ask “And the farmer’s share? Well, it’s right here,” he’d reply, waving high the last slice, “and it’s the heel!”

Guebert also notes that the major player in the market when it comes to setting food prices are Mother Nature and Uncle Sam.

So, go ahead and complain about today’s rising food prices. Make sure you point to today’s biggest pushers, though – weather and Washington, not farmers.

Taking “King Corn” Propaganda Personally

Here’s two pieces of advice for young filmmakers who want to make the ground-breaking documentary attacking a popular industry:

  1. Make sure no relative has connections to the industry you target.
  2. More important: Should a relative have such a connection, and you ignore the above advice, make sure this relative also isn’t a journalist.

Such is the problem now facing poor Curt Ellis, whose sister married the brother of a Marshall, Mo. newspaper columnist.

Marcia Gorrell writes poignantly about life on the farm for the Marshall, Mo., Democrat-News. And her brother’s wife’s brother not only called field corn “crap” because he was stupid enough to try and taste it like it was corn on the cob, but made a movie about it and is out pushing it. In her most recent column, she writes:

“It hurts — alot. It hurts because we take pride in what we do. We are proud of the fact that Americans pay less than of their take-home pay for food than any other country. We don’t think our food supply is “too cheap.” We work hard to make that happen.”

 Gorrell goes on from here, and talks about how the mainstream media, many of whom have never worked a field in their lives, fell out of their chairs and on their knees with praise for “King Corn,” eating up every falsehood like it was buttered popcorn.

For a real writer with farmland roots, it was indeed painful for Gorrell to see. And I’m sure that at the next family gathering, it will come up (As it has in the past — she’s already sent Ellis a five-page letter critiquing the movie). But something tells me the more they promote their film, the more they will hear about it from farmers and family who know better.

Iowa Corn Sets Record Straight

Radio Iowa did a story today on corn and food prices allowing the Iowa Corn Promotion Board to tell the real story.

Iowa Corn Promotion BoardJulius Schaaf, chair of the Iowa Corn Promotion Board (ICPB) says those who say corn prices at “record” highs should get the facts straight.

Schaaf says when you look at the price of corn in past years, there were times when corn got over three-dollars a bushel – and when plotted against the rate of inflation — that equates to over seven dollars a bushel. “So in real dollars, you can’t say that we’re setting record prices,” Schaaf says, “one thing you can say is that we’re setting record prices with oil, when you plot that (oil prices) against the inflation rate, we are setting records.” He says for example: in mid-1984, corn at the farm gate sold for $3.05 a bushel in Iowa, but it would take $6.27 in today’s dollars to equal that.

Schaaf also notes that transportation and packaging are really driving up the cost of the food.

Congrats to Iowa Corn and Radio Iowa for telling “the rest of the story.”

Cow Gut Enzyme Breaks Down Corn Plants

Cow eatingResearchers at Michigan State University have found a way to breed corn plants that contain an enzyme found in cow guts that can speed up the process of converting the plants into ethanol.

“The fact that we can take a gene that makes an enzyme in the stomach of a cow and put it into a plant cell means that we can convert what was junk before into biofuel,” said Mariam Sticklen, MSU professor of crop and soil science.

The new variety of corn created for biofuel production is called Spartan Corn III and it produces an enzyme that separates pairs of sugar molecules into simple sugars. These single sugars are readily fermentable into ethanol, meaning that when the cellulose is in simple sugars, it can be fermented to make ethanol.

“It will save money in ethanol production,” Sticklen said. “Without it they can’t convert the waste into ethanol without buying enzymes – which is expensive.”

Growing Positive on Corn

In March 2007, the USDA stated that growers intended to plant 90.5 million acres of corn. Given that farmers had planted 78.3 million acres in 2006, this was a very optimistic prediction. This past month, the projection from USDA was 86 million acres, down from last year but still way above what was seen before.

High input costs, especially fertilizer, are greatly to blame, but the National Corn Growers Association has held that the number of planted corn acres will be above the USDA prediction. Today, we have further confirmation, via the Associated Press.

Darrell Good, University of Illinois agricultural economics professor:

“The pendulum has swung decidedly in favor of corn at this point. For a lot of the central and northern Illinois farms, corn pencils out easily to be $200 an acre more profit than soybeans.”

Last year, the final corn planting was 3.1 million acres over and above the USDA’s prediction. Question now is — how high in 2008?

Time to break another record, growers!



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