Dec 14, 2006
Johanns: Costly Corn Squeezing Farmers
AP Interview: Johanns Says Ethanol Demand Will Squeeze Farmers, Not Necessarily Consumers
Soaring corn prices are squeezing meat and milk producers, but consumers will not necessarily see higher prices at the grocery checkout, Agriculture Secretary Mike Johanns said in an interview.
Because so many factors go into making food, consumers probably will not see a direct impact, he said.
I'm reading Michael Pollan's The Omnivore's Dilemma
, the first section of which focuses on corn. From the book:
Corn is what feeds the steer that becomes the steak. Corn feeds the chicken and the pig, the turkey and the lamb, the catfish and the tilapia and, increasingly, even the salmon, a carnivore by nature that the fish farmers are reengineering to tolerate corn. The eggs are made of corn. The milk and cheese and yogurt [...] come from Holsteins that spend their working lives indoors tethered to machines eating corn.
Head over to the processed foods and you find ever more intricate manifestations of corn. A chicken nugget, for example, piles corn upon corn: what chicken it contains consists of corn, of course, but so do most of a nugget's other constituents, including the modified corn starch that glues the thing together, the corn flour in the batter that coats it, and the corn oil which gets fried. [...]
To wash down your chicken nuggets with virtually any soft drink [...] is to have corn with your corn [via high-fructose corn syrup]. Grab a beer instead [...] and you'd still be drinking corn, in the form of alcohol fermented from glucose refined from corn.
Pollan says more than 1/4 of items in the average American supermarket contain corn. Everything from Twinkies to Cheez Whix to the sheen on the cover of magazines.
Given that, this should have been no surprise then:
Corn: The inflation crop
With corn farmers now getting $4 a bushel for their crops - double the price just two years ago - corn's become the crop of choice for farmers.
As corn output jumps, farmland devoted to other crops will drop. Acreage devoted to cotton, for instance, is expected to show a 14 percent decline from 2006, according to the National Cotton Council. Soybeans, wheat, barley, oats and alfalfa also will be displaced.
The government sponsored rush to corn-based ethanol, then, not only drives up its price, it drives up the price of everything where it is used an input and drives up the price of other crops by lowering their supply.
Surely, the former agricultural secretary (now running for Senator of Nebraska) could have seen this coming.
See also: U.S. ethanol drive powering food prices higher: CIBC's Rubin