The price of tea in China (or corn in Indiana) Part I
Posted on March 17th, 2008 in Uncategorized | No Comments »
I’ve been thinking and hearing a lot about the overall economic effect from changes in crop production and crop failures. What specifically I have been hearing about are the ripple effects of the movement toward ethanol production in the U.S. The desire for ethanol has led many farmers to move away from wheat and barley production to corn production. The resulting decrease in acreage devoted to these crops is linked in turn to the increase in their scarcity and price. I find these topics of interest not only as a consumer, but also due to my upbringing on a farm and my homebrewing hobby.

There has been much excitement over the construction of a huge ethanol refinery no more than twenty minutes from the house I grew up in. Much of the benefit has been touted to be the addition of some good-paying jobs, benefit for farmers in the form of higher corn prices and money flowing into the local economy. But, after the plant had been built and many more like it either in the works or already in existence by now, there has begun to be some questions about this whole-hearted move toward ethanol production. It’s so exciting to think of our country, our economy being much less linked to petroleum. However, what will happen as we make the turn from an economy where petroleum fuels us and agriculture feeds us to one where agriculture ostensibly does both? I’m thinking in terms of a) ripple effects and b) who will get screwed in the mean time.
My existence is in two worlds—one is the agriculture-rich American Heartland full of thousands of small farmers that could use good news in an era of increasing corporate farming. The other existence is my current one, living in the Pacific Northwest, separated from major agriculture by a mountain range and feeling the economic effects of farmers’ choices in what they grow (but, more on this later). Thinking of where I come from, I see the faces of men and women that bust their asses in the spring and the fall and the rest of the year watch market prices and the skies and hope that harvest yields enough to pay off loans, feed families, repair equipment, etc. They are the ones buying into the gamble that is ethanol and fill their fields with corn in the hopes that this all pans out in the long run. Their margin for failure, however, is much smaller than corporate farms or those plunking down the huge amounts of capital to build plants like the Andersons Clymers Ethanol Plant.
These same folks, however, are also the beneficiaries of government intervention via price supports and incentives. The push for ethanol production has led the U.S. government to favor the production of corn. The one plant I mentioned above is taking in 40 million bushels of corn per year. Forty million bushels. That’s a hell of a lot of corn that used to go to produce food for people and animals. And it’s also a lot of acreage that used to be planted in something else. If that’s happening in a lot of places, which it is, the effects on the food supply could be huge. I want to say more about that in my next entry.
I love that there is increased interest in what’s being planted in American fields. In places that are commonly derided as “flyover country” and touted as “Jesusland” in election cycles, the decisions of farmers are mattering more than ever before. I’m glad folks are paying attention to farming again (yeah for the farmers!). I also think there should be some more serious discussion of a movement away from price supports in agricultural markets. More on my thoughts on the consumer side of things in the next post.
