Food or Fuel

Food or Fuel the ongoing debate in which many have suggested that world food prices have skyrocketed due to corn ethanol.  At first glance the argument sounds pretty significant.  Using farm ground to grow corn that will be burned in cars while the world starves sounds petty and vain.

Is that the whole story though?  Corn grown in America primarily provides high fructose corn syrup and feed corn for beef.  This not the sum total of what corn grown in America provides but is the most significant part.  To really understand the argument food or fuel lets break down corn ethanol and look at its component parts.

Feed corn (the bulk of the industry) is used to feed cattle for the beef industry.  As it so happens the leftovers from corn ethanol production can be used to feed cattle, except it has much of the starch removed.  Starch is hard on cattle anyway so the resulting feed is higher grade than before the ethanol process.

High Fructose corn syrup, most people (but not all) will agree that even though this stuff is in almost everything it is far from good for you.  Maybe an increase in price in that product will result in a dietary shift over time that would be good for Americans anyway.

But hang on,  Is corn really the best plant to be making ethanol out of anyway?  There seem to be a number of options that would result in far superior quantities of fuel with a reduction of effort.  If farmers practiced field rotations with sorghum or sugar beets ethanol could be created in greater quantities and the leavings could still be useful as feed.  Or better yet, water treatment facilities could be modified to purify the water with cattails and harvest the resulting plants for ethanol production.  This would reduce costs for both parties and keep more farmland in "production".

Finally,  as long as farmers are being paid to under utilize acreage in order to prevent grain prices from going to low it seems that this is a pretty hard argument to make.  If it really is so desperate as to choose between food or fuel doesn't it seem ridiculous to pay farmers not to grow crops.

It is odd that the ones that seem to be most adamant about not creating an ethanol culture are also the ones who talk about free market inputs.  If free markets work (and they probably do)  why not let them work without intervention.  

More on free markets and government intervention later.