Monday, May 21, 2007

I guess that’s one indication of bad economics

Holy Shit!Just So You KnowPerfidy Attacks

Who knew that trail mix was cheaper than corn? Not me, at least not until this morning’s WSJ article entitled ”With Corn Prices Rising, Pigs Switch To Fatty Snacks“.

GARLAND, N.C.—When Alfred Smith’s hogs eat trail mix, they usually shun the Brazil nuts.

“Pigs can be picky eaters,” Mr. Smith says, scooping a handful of banana chips, yogurt-covered raisins, dried papaya and cashews from one of the 12 one-ton boxes in his shed. Generally, he says, “they like the sweet stuff.”

Mr. Smith is just happy his pigs aren’t eating him out of house and home. Growing demand for corn-based ethanol, a biofuel that has surged in popularity over the past year, has pushed up the price of corn, Mr. Smith’s main feed, to near-record levels.

...

Mr. Smith says he’s paying about $63 to feed a single pig for five or six months before it goes to market—up 13% from last year. His costs would be even higher if he didn’t augment his feed with trail mix, which he says helps him save on average about $8 a ton on feed.

(ellipsis mine)

The presumption that corn-based ethanol was somehow going to be a great net-positive for the US economy has always been based on the thinnest of pretense, put forward by the farm lobby in the US.  As covered in an earlier post here (regarding Michael Bloomberg’s energy plan), corn is just about the stupidest way to make ethanol, perhaps second only to making ethanol out of oil itself, if such a thing is even possible.

And even if it were technically wise to do so, the mad rush to corn-based ethanol, driven by government mandates and subsidies that help nobody but the farm lobby, was always going to affect the supply/demand curve for corn.

Better late than never, there appears to be a sudden realization of the problem, if recent press mentions count for anything:

The items above are cherry-picked from among many, many other such recent stories. The last two are of a genre that puts the lie to the entire boondoggle being foisted onto the American consumer, particularly given that cane-based ethanol actually generates far more energy than it takes to produce, unlike corn-based ethanol.  Cane-based suffers, however, from the choke-hold the farm lobby continues to wield on the American legislative windpipe.

Much the same as, say, in the waste industry, where at a high enough price for landfill space, people are willing to recycle, prices for oil in the energy market can cause people to willingly overpay for alternatives. But when the costs of the alternatives, direct and indirect, become high enough, as they appear to be doing in the ethanol market, consumers are certain to rethink that entire “energy independence” thing.

Corn based ethanol is “ethanol done wrong”. Add to that the fact that it’s “ethanol done expensive”, and you can just wait for the increased backlash, attempting to drown out the farm lobby. The question, of course, is whether our legislative overlords will be allowed to listen and undo the damage they’ve done over the past twenty years on this front.


Posted by Patton on 05/21/07 at 06:57 PM
Holy Shit! • Just So You Know • Perfidy Attacks • Permalink