Will Nothing Slay the Ethanol Dragon?

Apparently the beast cannot be starved to death. As the drought kills off corn by the stalk, animal feed costs are rising, and this has a big impact on livestock management. It's causing ranchers to slaughter their animals earlier than usual, increasing the supply temporarily and actually pushing down meat prices.  

Yesterday, President Barack Obama announced a plan for the government to buy $170 million of this meat in order to keep farmers happy by keeping the prices up. This is a terrible idea, as the Washington Examiner explains:

"Prices are low, farmers and ranchers need help, so it makes sense," Obama explained. "It makes sense for farmers who get to sell more of their product, and it makes sense for taxpayers who will save money because we're getting food we would have bought anyway at a better price."

None of this makes sense. In fact, Obama's move only harms American consumers while protecting a corrupt federal program.

A drought is currently driving down corn production. The shortage of feed is forcing livestock producers to slaughter animals early, putting downward pressure on meat prices in the short run and guaranteeing shortages and higher prices next year. But nature is not the biggest factor in this crisis -- the government is. Specifically, the federal government's ethanol mandate, which requires that 13.2 billion gallons of corn-based ethanol be produced in 2012.

Thanks to the ethanol mandate, more than 40 percent of the nation's corn crop now goes into the production of a useless fuel that hardly anyone would buy if the government didn't require it. That's up from just 17 percent in 2005, before the mandate went into effect. Only 36 percent of the corn crop now goes for feed, and 24 percent goes for food.

Obama could solve this problem instantly by suspending the federal ethanol mandate -- something his EPA actually can do unilaterally and legally. Instead, Obama will buy up meat -- a move that meat producers say won't help them much anyway. "It doesn't solve the problem of having enough affordable corn next summer," industry analyst Steve Meyer told Reuters. "Without changing the ethanol program, nothing can be done," he said.

Right, so the artificial purchase of the meat will keep prices high, not low. And then next year when ranchers really start having to pay through the nose for this year’s poor corn crop, what happens to meat prices?

Even the United Nations is begging the Environmental Protection Agency to suspend ethanol fuel mandates, but there’s no sign of movement so far. The consequences:

To recap, government is driving up the cost of food, animal feed and gasoline, and Obama's solution is to drive up meat prices as well. Obama could eliminate the entire problem overnight and reduce carbon emissions were he to waive the ethanol mandate in a time of drought. Instead, he is creating a new spending program to mollify livestock producers, who, were it not for the ethanol mandate, would be able to make an honest living without his help.

Last week, Obama said he wants to do for other industries what he did for General Motors. If by this he meant waste taxpayers' money to preserve a lousy status quo, then bravo and mission accomplished.

Damon Root pointed out earlier an analysis of how Obama is pandering to farmers with subsidies already. If the government wasn’t so insistent on catering to both the farming and the ethanol lobbies, our food and fuel prices would drop.

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  • The Late P Brooks||

    "Prices are low, farmers and ranchers need help, so it makes sense," Obama explained.

    This, in and of itself should cost him the election. But it won't, which demonstrates the "effectiveness" of the curriculum in the government schools.

  • sarcasmic||

    Government schools are extremely effective at churning out economically illiterate serfs who are conditioned to asking permission and taking orders from authority.

  • robc||

    According to a presentation I saw last week, corn and soybeans are projected to bring in a PROFIT or $75-80 per acre this year. Not enough if you are planting 100 acres, but if you are over 1000, thats some decent money.

    BTW, for those interested, malting barley crushes that, but feed barley is way below it. With a reasonable mix (75/25), a farmer would make a bit more with barley, but with a much higher risk.

    Im assuming corn/soybeans have different price layers too, but I dont think they are as extreme as in barley production.

  • Brett L||

    The standards on malting barley are pretty tight and it doesn't really compete with other grains like feed. I've been looking at it for work.

  • robc||

    In the US, the maltsters select about 50-60% of the crop per year.

    They do have tight standards, and the shrinking US crop is making it tough on them.

    In Canada, 10-15% goes to the maltsters.

  • Bill||

    This sounds like an incident from Atlas Shrugged. You know, that crazy, unrealistic book about how government officials act and the policies they come up with. The complaint is that it is cartoonish and ludicrous stuff like that doesn't really happen.

    Hmm, I guess it does.

  • Brutus||

    See, this is how government pursues good social ends when the market fails.

    /Tony

  • The Hammer||

    Jesus Christ, is there anything this moron can't fuck up?

  • John||

    IN fairness this isn't just Obama. The entire government seems to have gone insane.

  • Hyperion||

    They've been completely out of control since the 2nd term of Boooshh. 9/11 seems to have been the final catalyst in their plunge into insanity.

  • Brett L||

    Since McCain got kicked in the nuts in Iowa in the 2000 primary for saying he thought subsidies should end.

  • Brandybuck||

    Farm subsidies, and ethanol subsidies in particular, are sacred in Iowa. That's "sacred" as in a deeply held religious belief. I spent some time there last year, and they're serious about it. I was talking to a libertarian in a pub in Des Moines, and I told him it was bizarre that there were so many explicitly pro-subsidy billboards around the state. He told me to keep my voice down because someone might overhear us.

  • Hyperion||

    Nothing that he cannot fuck up, and nothing that he will not fuck up if given the opportunity.

  • squarooticus||

    Just add another layer to the onion, like government always does. Removing layers means eliminating constituencies, which is a political non-starter.

  • BakedPenguin||

    To statists, the solution is never to do away with anything government. Someone was trying to make big sugar into an issue a few years back, and they kept harping on the massive subsidies sugar gets. Instead of fighting to repeal those, they argued for a new sugar tax.

  • Voros McCracken||

    This is either unrepentant lunacy or perfectly understandable politics.

  • Randian||

    They aren't mutually exclusive.

  • ||

  • mad libertarian guy||

    What's going on with the "no pics" shit with reasonable?

    I see YouTube just fine inline, but pics are MIA.

  • sarcasmic||

    “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
    - Thomas Sowell

  • Randian||

    I wonder what Law of Price Asshole would have to say about that quote.

  • Christina||

    But don't you see, if the meat prices are higher then ranchers will have more money to buy things, thus improving the general economy. Because, you know, money = wealth.

    ^^^This is what liberals actually believe.

  • sarcasmic||

    Not only does money equal wealth, but the government prints the money!
    That means that the government is the source of all wealth!

  • EDG reppin' LBC||

    You have made my brain pain.

  • John||

    I have to say this is the most evil thing I have ever seen our government do. You can debate wars all day. But right now we are intentionally raising the price of food and literally starving the world to pay off a bunch of Senators from the Midwest and various big ag cronies. If you live in Egypt on five bucks a day, a rise in the price of corn is a big deal. And no one outside of the people who are effected and a few economists and libertarians who no one listens to anyway seems to be bothered by it.

  • kinnath||

    Scrawny little people with dark skin are not our problems.

  • Killazontherun||

    When that belly starts to bloat in a few months, a Newsweek photo journalist is going to snap a picture of him to represent the littlest victims of capitalism.

  • kinnath||

    Realistically, we only need to keep enough of them well-fed to be worthwhile targets.

  • Killazontherun||

    Monocled Heathen Deviants Assemble!

  • Loki||

    Scrawny little people with dark skin are not our problems can always be dealt with by drone.

    FIFY

  • kinnath||

    Targets

  • Hyperion||

    It is evil, and stupid. But the WOD is the most evil thing that our government has ever done, and continues to do.

    Obama has no fear at all right now. The GOP nominated Romney and Obama seems to be trying to prove on a daily basis, that no matter what he says, or does, he is getting 4 more years.

  • CampingInYourPark||

    "But the WOD is the most evil thing that our government has ever done, and continues to do."

    And the only thing keeping progressives from a takeover of the rest of the drug market is that it's...not legal.

  • John||

    This is worse. The WOD never starved anyone to death.

    And Obama is desperate right now. I think he is going to lose.

  • Geoff Nathan||

    Damn, I wish I could just retweet this comment (not that anyone reads my tweets anyway), because this gets at the heart of it (well, this and the article itself).
    Sigh....

  • Adam330||

    There's a solution to this too- more foreign aid.

  • Invisible Finger||

    The important thing is that poor people will have to pay more.

  • Hyperion||

    Not. Middle class working folks will have to pay more. We will just increase SNAP for the poor folks. Oh, and those people who were middle class, that now cannot afford the meat, we will just put them on SNAP too. See how things work out so well, the Dems got it covered.

  • Tim||

    Central planning.

  • Enough About Palin||

    I wish my house had a meat locker like the one pictured.

  • Cliché Bandit||

    In Chianti the prosciutto hangs in the open shops, usually from the ceiling. I wanted to bring one back but my wife said A. they wont let you and B. I am not packing a ham hock with my unmentionables and making everything smell like pork...last part sounded like a feature to me.

  • Tim||

    Lady Gaga got away with it.

  • EDG reppin' LBC||

    And BOOM goes the dynamite!

  • Cliché Bandit||

    uhhh which part? The smelling like pork or the smuggling of good cured italian piggy products?

  • EDG reppin' LBC||

    A reference to the phrase, "packing a hamhock with my unmentionables" I believe.

  • Cliché Bandit||

    i get it now...a little slow on the uptake.

  • EDG reppin' LBC||

    "Packing my unmentionables with a hamhock" is better phrasing, and would be apt for Lady Gaga.

  • Killazontherun||

    Who? Sorry, but that name comes from more than fifteen minutes ago to ever justify retaining it.

  • The Late P Brooks||

    And more people in the middle class can be put on the food stamp program.

    SUCCESS BREEDS SUCCESS.

  • R C Dean||

    Actually, I believe ground beef prices have hit an all-time high.

  • ||

    $3 a pound at Costco. I'm about ready to bust out my torches and pitchforks.

  • Cliché Bandit||

    this development bodes poorly for paleo adherents...but well for cattle futures.

  • Brett L||

    I was just at the grocery store and scandalized by the price of beef. Fuck that. I'll go vegetarian before I give them $9/lb for mediocre cuts of steak.

  • Anonymous Coward||

    "Prices are low, farmers and ranchers need help, so it makes sense," Obama explained. "It makes sense for farmers who get to sell more of their product, and it makes sense for taxpayers who will save money because we're getting food we would have bought anyway at a better price."

    It doesn't make a dime's worth of sense. It causes high prices now and even higher prices later when the actual scarcity of meat hits the market.

    Obama has just stated that he will fuck the consumer in the wallet if it gets him reelected. Sad to say, it probably will.

    FORWARD!

  • sarcasmic||

    Rest assured that high prices will be blamed on the free market and be used as an excuse for more intervention.

  • Ska||

    I read the word FORWARD but keep hearing Excelsior!

  • Hyperion||

    We shouldn't be eating meat anyway. That is for our elite rulers and betters. We need to be good sheep and shut up and eat our Tofurkey and other nutritious and yummy soy products already. Moochelle says so.

  • Invisible Finger||

    I would like to hear his asshole wife's convoluted logic on this.

  • AL Haines||

    Easy. Making meat more expensive means we'll buy less of that arterycloggingsaturatedfat loaded meat and switch to a hearthealthywholegrain diet instead. It's been Manface's plan all along.

  • Tim||

    In Iowa did Barrack Obama
    A presidential mandate decree:
    Where Ethanol, like a sacred river, ran
    Through bank accounts measureless to man
    Down to a subsidy.
    So twice five states of fertile ground
    With walls and regulations were girdled round:

  • Ramjet||

    A+

  • robc||

    clap clap clap

  • Killazontherun||

    Holy shit, Tim. That was excellente.

  • R C Dean||

    I think we're done here today.

  • The Late P Brooks||

    It's funny, but that FORWARD! slogan doesn't seem to be getting a whole lot of play; around here, anyway.

    Which is too bad, because I was thinking about doing some

    FORWARD, LEMMINGS!

    shirts. It seems appropriate to me.

  • Anonymous Coward||

    I would absolutely buy this product and wear it just to enjoy the looks of shock, horror, and disgust as I went about my day.

  • Killazontherun||

    Pose Obama in that side view Lenin pose with an army of lemmings under him.

  • Killazontherun||

  • Cliché Bandit||

    And on topic: This is actually worse than dirt farming subsidies. Considering the longer term opportunity costs in growing the wrong crop versus not growing a crop at all (even including the weeds problem). So, essentially, an improvement would be for the government to increase its dirt farm subsidies over this...how fucked is that?

  • Almanian's Evil Twin||

    more than 40 percent of the nation's corn crop now goes into the production of [ethanol]

    I had no idea it was this high a proportion of the crop when I started reading this recently. The first time I saw it, I thought it surely must be a typo.

    Guess not. Holy FUCK, when government starts screwing up shit, it screws it up reallllll goood.

  • Hyperion||

    when government starts screwing up shit, it screws it up reallllll goood

    And they are just getting the party started!

  • Killazontherun||

    Remember in '84 when Reagan spent the entire campaign season repeating, 'Carter's fault! Carter's fault!'. At least Obama is doing something.

  • Drake||

    Proving Reagan / Romney right?

  • Killazontherun||

  • Adam330||

    Repeating "Bush's fault! Bush's fault!"

  • Killazontherun||

    You know why I never take the left side of an argument except sarcastically, like above? It is not so much my consistent philosophy as it is I hate to be wrong more than I hate to be an outcast.

  • Loki||

    Last week, Obama said he wants to do for other industries what he did for General Motors.

    Sounds like a threat to me.

  • Drake||

    What the fuck is the government going to do with $170 million worth of meat? It isn't like guns, or tires, whatever - that can be put into storage for years.

    They can't give it away, that would defeat the purpose of wasting money to prop up meat prices. Just toss it in a field to rot?

    Besides all the other reasons that this is offensive, I find the colossal waste disgusting.

  • Adam330||

    Since he says we're "getting food we would have bought anyway at a better price," I'm assuming he's planning to sell it or give it away. Which means he doesn't understand basic rule of economic. Which is not a surprise.

  • Drake||

    I think the military has most of that stuff locked in on contracts. Maybe the Marine will get steaks at the chow hall for a month, but that's other food they aren't buying or not using.

  • Killazontherun||

    Darn. I was hoping to see some deferred cost government beef jerky in the mail in the next few months to bribe me, but it looks like Obama is going after the military vote instead.

  • Brandybuck||

    Gummit jerky!

  • Killazontherun||

    Ever had the Doritos they make in Latin America and Mexico? Fried with pork broth added to the oil. So damn good. Some Venezuelans are working on my roof and shared them with me.

  • GILMORE||

    Do you know that Doritos sell more than $1.7 billion a year?

    Rap music, less than $1.5 billion.

    Doritos are bigger than Rap.

  • Adam330||

    The examiner article says that the Department of Agriculture is buying it, and DoD buys its food through the Defense Logistics Agency. Who knows what they plan to do with it, but pretty much anything other than burning it or letting it rot will defeat the purpose of driving the price up. If it's truly "food we would have bought anyway," then it won't work at all as that demand is accounted for.

  • Tim||

    AMtrak will buy it, and then let it rot.

  • sarcasmic||

    Let it rot. It's better that the meat be wasted than prices be allowed to drop.

    It worked in the Great Depression, why wouldn't it work now?

  • Killazontherun||

    A Feast For Crows

  • Adam330||

    "Prices are low, farmers and ranchers need help, so it makes sense," Obama explained. "It makes sense for farmers who get to sell more of their product, and it makes sense for taxpayers who will save money because we're getting food we would have bought anyway at a better price."

    When he says "getting food we would have bought anyway at a better price," does this mean he's planning for the government to turn around and sell the meat? Does he not realize that this will then push down the prices that the government's purchase was intended to bid up?

  • Bradley Strider||

    Maybe they plan on putting the meat in a big pile and burning it, like with drugs.

  • fried wylie||

    burning a pile of meat and drugs sounds like a bad idea.

  • robc||

    On August 1st, Canada ended their wheat board, with its monopoly on wheat and barley.

    They are going towards a free market, we are going away.

  • Torontonian||

    Canadian agriculture remains far removed from anything resembling a free market.

    Milk, butter, cheese, eggs and poultry are "supply managed" and a fortunate few producers enjoy strict quotas and import tariffs over 200%.

    I stock up on these items and others any time I'm in Buffalo; shopping arbitrage is pretty much the only reason for making the trip.

  • ||

    President Barack Obama announced a plan for the government to buy $170 million of this meat in order to keep farmers happy by keeping the prices up.

    So he has a plan.

    Does this mean it has to go through congress first? Or is he going to to simply just do it?

  • RPR2||

    Cash for Cows. Gets all those methane farting cows off the roadz.

  • GILMORE||

    Obama could eliminate the entire problem overnight and reduce carbon emissions were he to waive the ethanol mandate in a time of drought. Instead, he is creating a new spending program to mollify livestock producers, who, were it not for the ethanol mandate, would be able to make an honest living without his help.

    but.... Iowa. Presidents must suck Iowa's dick forever. Its a rule.

  • Paul.||

    Modern government thinking: When prices drop, it's a "market failure".

    Affordable housing: Market failure.

    If Obama actually manages to get healthcare costs down, can we call that a "market failure"?

  • Paul.||

    Oh, how many votes did the administration just buy with this policy, and would Romney do anything different?

  • GILMORE||

    Can anyone find an example of someone PRAISING this? NOT in the Boise

    please. Even Tony and the other progresso-trolls are hiding behind rocks right now.

  • Shocked||

    I bet it gets positive spend on the evening rhetoric roundup, 'er Evening News, if it's covered at all.

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