Surging food prices ‘has not merely been caused by drought, it has been rooted from government policies intended to promote the ethanol biofuel energy industry.
Jeffrey A. Tucker at the Laissez Faire Books explains:
Looking this up and examining the history, it appears that government has been trying to put corn in our gas tanks for decades, even back to the 1960s. There were tax breaks, subsidies, lofty national goals, smiley stickers for executives who publicly backed this nonsense, but none of it took. Finally, our masters brought out the brass knuckles and everyone shaped up, culminating in a coercive mandate imposed six years ago.
Now we are stuck with this de facto mandate that we have to put corn in our gas tanks, all based on the kooky idea that fossil fuels are just too primitive, that we have to mix our gas with a movie-theater treat to make it truly clean and efficient.
But clean and efficient are two things that ethanol is not. The reason your edger and weed whacker don’t fire up in the spring months is most likely due to the presence of corn in the tiny gas tanks. The fuel mixture does not stay stable over time and tends to gum up engines. This is why the store shelves are filled with gas-tank additives of all sorts that did not used to exist. The whole point is to correct for the mess that ethanol makes.
Of course, there is a huge industry out there dedicated to debunking the idea that there is anything the matter with ethanol. But here’s the problem: People who make the pro-ethanol argument are either 1) the same people who think we ought to turn our toilets into composting pits or 2) speaking for industries highly dependent on the many forms of ethanol subsidies, so they have every incentive to deny the obvious for as long as possible.
But ask people who depend on a stable and reliable fuel for their livelihoods, and sometimes their lives. Talk to any boaters. You don’t have to know any. Head over to any boaters’ forums and see what they say. They go out of their way to find the few gas stations that actually sell ethanol-free gasoline, mainly because they can’t afford to take risks that come with bad gas and bad engines. They find stations that sell no ethanol gas, like those listed at pure-gas.org.
Another fact: Though people have thought for centuries that corn is a decent fuel, it took the mandates to force it into cars. Why? Because consumers knew better. Manufacturers knew better. The petroleum industry knew better. Government and the corn industry had a different idea and gave it to us all good and hard.
Nor is it efficient. As even Paul Krugman admits, “Even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains.” We also have to add the huge expenditure associated with fuel additives, engine fixes, lawn mower replacements and the vast frustration that comes with the regulatory wrecking of the internal-combustion engine.
Now let’s look at what’s happened to crops since 2005. The percentage of crops devoted to corn have gone from 24% in 1999 to 30% today. Meanwhile, the crops devoted to soybeans, hay and wheat have all gone down, thereby increasing feed costs for ranchers and consumers. Again, this is not the market talking. This is not what any actual market players are pushing. This all results from government mandates.
Meanwhile, the price index of Illinois farmland has tripled in the same period. Even though every price signal would otherwise indicate to farmers to plant less corn, they plant more. And even though land values all over the U.S. went into a major bust in 2008 and following, Illinois farmland goes up and up. This is a result of government intervention, building artificiality into the system and creating unpredictable distortions.
It almost seems hard to believe. It’s a scandal that government has degraded home appliances, indoor plumbing, paint, cosmetics, gas cans and so much else. Yet the ethanol nonsense might be the worst of all, because it represents a fundamental attack on the technology and literal fuel of modernity itself. As you look back at it, it’s been going on a very long time, from the initial ban on lead fuels, and now look where we are.
In the name of efficiency and “clean fuels,” the government is shutting down the technology essential to life as we know it. And the spillover effects are everywhere, affecting nearly everything we eat. As usual, all these regulations are premised on the supposition that conditions will never change and that the state can take the existing world and pound it into its preferred shape. But the existing world as the state knows it is always a world of the past. Introduce one change and the whole model blows up.
That is what is happening with ethanol right now. The mandate is causing vast distortions and crazy costs for everything and everything. The scandal is how little we know or care. Maybe famine will make the difference?
Add central banks inflationism to the above conditions and we end up with the potential risks of stagflation and a food crisis.
Yet a global food crisis does seem like a growing menace. Proof?
China’s government announced of the release corn and rice reserves to ease shortages
Reports the China Daily
China will release corn and rice from state reserves to help tame inflation and reduce imports as the worst US drought in half a century pushes corn prices to global records, creating fears of a world food crisis.
Friday's announcement was the first release since September last year, when China said it would sell 3.7 million tons of state corn to keep inflation under control.
The release may prompt Chinese importers to cancel shipments in the near term and take some pressure off international corn prices, which set a new all-time high on Friday as the US government slashed its estimate of the size of the crop in the world's top grain exporter.
"Bottom line - rationing is in full force, and given the continually declining state of the US corn crop, more will be needed," said Christopher Narayanan, head of agricultural commodities research at Societe Generale.
China's State Administration of Grain did not specify the volume of corn or rice to be released from reserves. The Grain Reserves Corp will be responsible for selling the crops, but no details were given on the timing.
Some traders estimated the government might sell around 2 million tons to help stabilize prices ahead of the harvest, when supply is usually tight.
Beijing will probably need to replenish reserves towards the end of the year, and therefore the release will have only a limited impact on prices.
More uncertainties ahead.
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