Levin: Corn prices are about to skyrocket

Posted by The Right Scoop on June 12th, 2011 in Politics | 49 Comments

A truck driver called in to Levin’s show on Friday night to say that the price of corn that usually sells at $3.20/bushel has now more than doubled to $7.85/bushel because of the lack of corn being planted this year due to the cold weather and the rain. Considering that corn is used so profusely along with the continued push for ethanol, this could have a huge effect on food prices this fall.

Levin backs up what she says noting an article in Pajamas Media which says basically the same thing, except they reckon we will have to import more corn:

It would seem corn is back on the radar after having fallen off after the 2008 election, when ethanol was no longer a convenient club with which to beat the Bush administration.

Before that particular fight was over, however, former President George W. Bush had signed legislation which required 40 percent of the U.S. corn harvest to be slated for ethanol production, and for massive subsidies to make corn economically viable. …

This year could be a bad year; much of the corn in the eastern cornbelt is late getting into the ground, and from west Texas into Nebraska we’ve got the worst drought in 40 years. Parts of western Kansas have gotten no more than a quarter-inch of rain since the beginning of the year. This means the corn stocks could slip still lower.

Why is this a problem? Much like the price of oil, the price of grain worldwide is based on the dollar. In the case of oil, it’s because we’re the world currency and the largest user of oil. In the case of corn and indeed all grains, it’s because we’re the world’s largest producer and exporter. …

Now imagine we have to start importing grain. Suddenly Brazil or Argentina is setting the price, not us. Once you become a net importer of grain, you cease to be a world player in agriculture.

The issue with the mandate is that it is inflexible. Instead of allowing the market to decide how much corn should be sold to ethanol plants and how much should be sold overseas or used domestically, we’re mandating a certain percentage must go to fuel.

A fuel, it must be noted, which is inefficient when compared to gasoline, is hard on engines, and requires massive subsidies to be competitive with conventional fuels.

What remains to be seen is what happens next year, with the subsidies expiring, corn stocks likely lower yet, but a huge, inflexible mandate still requiring 40 percent of the crop go to fuel.

This is likely to be hard on food prices at a time when they are already going up. In an attempt to appease environmentalists — for whom nothing is ever enough — we risk mandating ourselves right out of dominance in one more area of the world economy.

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10 comments

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KenInMontana

Ethanol is an economic boondoggle. Consider this, for every one unit of ethanol produced, six units of energy are consumed. http://www.sciencedaily.com/releases/2005/03/050329132436.htm

Chris G.

"...legislation which required 40 percent of the U.S. corn harvest to be slated for ethanol production, and for massive subsidies to make corn economically viable."

SHAME on the GOP for nominating people like GWB to be their POTUS nominee, & the so-called "conservative" voters that voted for him TWICE!

Larry Gibby

Ethanol is a boodoggle for the green-eared monster in then White House. Soros flunky surrounded by a pack of communist hyenas who blame our problems on the system that supports them. They don't have a replacement for gasoline that is effective and economical. Coal doesn't cause asthma. These people breaking our backs and it isn't because they're stupid - it's intentional!

The Ancient

Whether or not Ethanol has any impact on the price, the fact remain that all food commodities are spiking, which will naturally lead to increase in prices, combined with increase in fuel costs, and you will see a massive dip in the economy,

As to if the current price is fair or if it should be a $3, the price is what the market will allow, if people can afford $7 corn (which they cant) then the market would stay there, but what will happen is people will eat less, creating a surplus and crashing the price, which will be worse for the farmers.

Personally Ethanol is the WORST thing for farmers, I see nothing but pain in the future for any farm that tied their lively hood to the scam that is Ethanol

PS. I have live in Indiana all my life, That is all we have here is corn.......

The Ancient

If you look at the Charts Corn Spike this high in 2008 when the Last Collapse Happened

Prepare if you can, because all indicators are that The rest of this year and all of next year at minimum is going to be a rocky ride.....

zytekfan

http://www.agmanager.info/energy/CornSupplyPropects_US-EthanolProduction_10-26-09.pdf

"Ethanol use of U.S. corn were relatively small until the turn of the century. From 2000/01

forward, ethanol use of U.S. corn has grown successively larger on an annual basis. During the

last three marketing years ethanol use of corn as a percent of total use has increased from 24% to 31% to 32%. Non-ethanol demand for corn for food, seed and industrial use continues to be steadily increasing over time, accounting for a projected 10% of U.S. corn use in the 2009/10

marketing year."

That report is from 2009.

With a now projected lower yield for 2011, and demand for ethanol production still rising, we may see 40% used for ethanol.

zytekfan

Ethanol does because ethanol for use in fuel has taken up 40% of corn produced in the United States. Trying to say ethanol has no affect on anything else using corn in the US is idiotic. Anything that uses a product of corn in it, has gone way up in price. Partially because of the weaker dollar and because of how much corn ethanol for fuel is using.

Troy La Mana

Why not build hydroponic farms for all the corn?

John Ramirez

I think I recall a man stating something about"and we will be burning our food",

You think it's unsafe to go to McDonald's now,

just wait till you only get 2 chicken nuggets for $5.00.

PunditPawn

And Guantanamo Bay will be closed, the deficit will be cut in half during my first term, you can keep your doctor and Insurance if you want to, Our oil production is higher than ever, The borders are more secure than ever, and Arizona is my favorite State (to sue).

Uggh.