California dairy farmers are getting screwed by corn ethanol, despite a record corn harvest again this year.
"The price took off about three or four months ago, and it hasn't stopped," said [rancher, George] Grossi, who uses about 25 tons of grain every two weeks to feed his herd of 200 cows. "It's because of all the new ethanol plants that are coming online."
The U.S. ethanol industry is booming, with more than 100 operating biorefineries and dozens more under construction, according to the National Corn Growers Association. Those refineries added about 5 billion gallons of fuel to the country's gasoline supply in 2006.
All this (state-mandated) demand for corn hasn't put a dent in federal price supports for the industry, of course. Don't fret, though:
"With lower energy intake, cows will produce less milk," [University of California at Davis dairy economist Bees] Butler said. "The milk supply will drop, the price of milk will rise, and the market will achieve equilibrium. It's almost magical."