The USDA announced that this year’s corn yield will be the lowest since 1995. As a result corn prices are projected to reach a record high, between $7.50 to $8.90 a bushel. To add a contrarian anecdote, the corn at my farmer’s market remains steady at 3 ears for $2.00, but that could change as the weather has just heated up on the West Coast.
With this runaway price spike in corn affecting livestock producers and commodity prices and all sorts of other industries, you would think this would be a good time to end the program that forces the United States to use a substantial portion of its corn in the production of biofuels. But for the moment, we still have a renewable fuels standard, and typically corn-based ethanol is produced to meet that standard. The United Nations has urged the US to stop this ethanol production mandate, citing the likelihood of elevated global food costs.
Under US law, 40% of the harvest must be used to make biofuel, a quota which the UN says could contribute to a food crisis around the world.
A drought and heatwave across the US has destroyed much of the country’s corn crop, driving up prices.
The US argues that producing much of its own fuel, rather than importing it, is good for the country […]
Writing in the Financial Times, the director general of the United Nations’ Food and Agriculture Organization (FAO), Jose Graziano da Silva, said suspension of the quota would allow more of the crop to be diverted for food production.
“The worst drought for 50 years is inflicting huge damage on the US maize crop, with serious consequences for the overall international food supply.
“The situation reminds us that even the most advanced agricultural systems are subject to the vagaries of the weather, leading to volatility in supplies and prices, not just on domestic markets, but also internationally.”
Here’s a classic case of what’s good for the US being terrible for the rest of the world. That typically does not lead to good outcomes for the world. Corn-based ethanol fails on its own merits. The energy used in production far exceeds the energy savings from using ethanol over fossil fuel-based energy. The biofuel standards could be reached by less invasive sources like switchgrass and other natural sources. Converting so much corn into fuel at a time of a massive corn shortage makes no sense, not only for the world, but also for domestic livestock producers suffering from a decline in feed, domestic food producers who use corn as an ingredient, and so on.
This may just take care of itself. The corn is expensive for the ethanol producers too, and some may suspend production if that reaches a tipping point where production becomes unprofitable. Agriculture Secretary Tom Vilsack says that ethanol production reduces the cost of fuel, but if corn prices keep rising that won’t be true anymore.
But for now, the USDA is holding firm, and as a result millions of people won’t be able to afford food around the world. This also speaks to the futility of creating a monocrop culture and our overwhelming (I would argue unnecessary) reliance on corn.