Monday, June 18, 2007

Food Inflation-We've Only Just Begun

Interesting Letter to the Editor at the American Spectator, the emphasis is mine:

Thank you for the article on GROPEC (Getting Rich Off Producing Ethanol from Corn). This is the biggest disruption of the American food supply in history. Other disruptions such as drought and disease are temporary. GROPEC is just getting started. The construction of ethanol plants resembles a gold rush. The government subsidy of 50 cents per gallon of ethanol together with the mandates you mentioned are the only reasons these plants are profitable. Even with the mandate, plants would have been profitable only for a short period of time without the subsidy. You neglected to mention that there is a tariff on imported ethanol. Brazil would love to supply us with sugarcane ethanol, which can be produced twice as efficiently.

As for food prices, they have only begun to rise. Most corn is either exported or used for animal feed. It takes time for the shock of increased feed prices to make their way through the market system. The pork you are eating now is from a pig conceived a year ago on $2 corn. The beef is from a calf conceived two years ago. These animals don't just disappear when feed prices increase. If the animals are healthy we feed them to market. As a pork producer I have 30 years and hundreds of thousands of dollars invested in a business that relied on affordable feed. Now that this insane government redistribution of wealth has pulled the rug out from under me I face some very difficult decisions. Do I cut my losses and get out or hope the other guy blinks first and pork prices increase. So it takes time for people like myself to decide to curb production as a result of high feed costs. Right now the most of the higher feed costs are being absorbed by producers like myself, not by consumers.

I do not see any way the ethanol subsidies can be stopped. Those who have made huge investments in the industry would scream bait and switch. As you know each farm state has two senators, none of whom will move against ethanol. The only thing we can do is try to stop the mandates and ethanol tariffs, and if your state still allows you the freedom to do so, stop putting ethanol in your tank. The ethanol industry rightly fears overproduction as a result of the artificial oversupply created by the subsidies, and thus they are trying to force you to use their product.

Has this ever happened before in a free country. If the government can make you burn your food supply, what is next. Will they make you eat pork and poultry instead of beef because cattle produce all those nasty greenhouse gases? Will they mandate that you eat your vegetables or buy rap music. Perhaps we could mandate subscriptions to The American Spectator and all our troubles would be over.

Hurting in South Dakota,

The letter was in response to "Food Before Fuel" and is actually more profound than the original article.

Here's the lyrics to the song