Ethanol Mandate Turns King Corn Into A Pauper
Politics: The U.S., once king of corn exports, is more like a corn peasant these days, given its precipitous loss of market share to other countries' growers. Look no further than Congress' ethanol mandate for the reason why.
In another sign of U.S. decline in the Obama era, the U.S.' share of corn exports has shriveled in the global marketplace. Our biggest buyer, Japan, has cut its imports of U.S. corn from 2.702 million metric tons last year to 1.968 million metric tons this year.
Similar figures are seen with our other top customers in Taiwan and China. Worldwide, the U.S. corn export total has dropped from 9.024 million metric tons last year to 5.106 million metric tons expected this year, according to the U.S. Department of Agriculture. It can be summed up as one thing: a loss of competitiveness.
Historically, the U.S. has been the world's biggest corn exporter. American farmers feed the world.
What's more, President Obama has emphasized the importance of exports to restoring the U.S. economy.
"Ninety five percent of the world's customers and fastest growing markets are beyond our borders," the president said in mid-2010. But with corn, one of America's biggest exports, all we see is decline across the board.
Commanding 60% of the global market seven years ago, the U.S. now only sells 40% of the corn on the international market today. The Agriculture Department reports that corn exports have fallen from 2.4 billion bushels in 2007-08 to 1.1 billion bushels in 2011-12.
Yes, a drought has taken its toll on output. But with about the same amount of acres of corn in cultivation now as five years ago, a human-made factor is obvious.
Fact is, corn is being redirected to the manufacture of ethanol rather than being sold for food, based on Congress' 2007 Renewable Fuel Standard law, which requires ever-increasing amounts of the nation's corn crop to go to manufacture the supposedly eco-friendly automotive fuel.
The regional publication Ohio Farmer reports that the government has directed U.S. companies to blend 13.2 billion gallons of ethanol with gasoline they produce, and wants 13.8 billion gallons next year.
That's central planning, and in an indirect way, it's creating famine, given that corn prices are now rising as a result, leaving many countries unable to buy the costly grain, at least from the U.S. And that's despite the U.S.' comparatively low transport costs.
Higher U.S. prices have proved to be a bonanza for low-cost producers such as Brazil, South Africa and Argentina, whose farmland prices have increased as much as fourfold (in Brazil), enabling them to sell more corn.
We've seen this before — state intervention in soybeans in the 1970s, once again directed at our big buyer in Japan, forced prices upward. It drove the Japanese and others to finance farms in Brazil — which now holds the title of Big Soybean, for its export prowess.
Now with the ethanol mandate, it's likely we will see another export market handed over to Brazil — or maybe some other country — once again.
Instead of letting markets direct their resources to their best use — and bring in cash from abroad — government intervention is forcing corn production into a inflexible straitjacket with ethanol, at government directed quotas that have driven corn prices higher and chased out our best customers from abroad.
Not even rising corn prices have brought reprieve from the Environmental Protection Agency, which proudly announced on its website that there would be no letup in the government standards.
So count on the U.S. losing its No. 1 spot in the global corn market, just as it did with soybeans. It's another perfect example of government outsourcing of an entire industry — not for economic efficiency's sake, but purely for political ends.
It's a sorry waste of food and influence.
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