Last week's Associated Press article about how corn prices are driving up food prices drew a visceral response from me. So I sent the Harrisburg Patriot a "letter to the editor" to offer a little more perspective. It's sure to provoke a wave of anti-ethanol zealots with half-vast information.
Yes, food prices have been and are rising. And yes, rising grain prices – along with rising beef, pork, poultry and wool prices – will impact food and clothing prices even more in the future. And, fuel prices will keep rising.
Since we are the reigning champions of the free market, we play by its rules: He who has the most money wins. Due to the collapsing value of the U.S. dollar, you and I are going to get progressively less in our grocery bags for the same amount of money.
Back to corn and ethanol
Yes, more corn is going to ethanol production – but not exclusively so. Tom Buis, CEO of Growth Energy, a biofuels advocacy group, explains: "Ethanol takes only starch out of the corn kernel. All the protein, fiber and oils go right back into the food supply – most of it as animal feed in the form of distillers grains."
Incoming technologies such as hydromilling and high-amylase corn hybrids promise to boost the corn-to-ethanol process efficiency. Other new technologies already have dramatically improved that efficiency over the last decade.
Back to bigger troubles coming to roost
Rising global demand for U.S. grain is a far greater factor than ethanol. It's real demand, not mere speculation. We are being outbid for our own resources by countries with far stronger economies.
The U.S. dollar's value has declined more than 30% compared to the euro in the last four years, according to the International Monetary Fund. It's declined even more relative to the Chinese yen. Their buying power is increasing; ours is shrinking. And there's one huge reason why.
The United States still is failing to fix its already horrendous federal deficit – writing checks it can't cover. If you and I did that, we'd be in prison.
Because of this, the IMF is seriously thinking of replacing the U.S. dollar as the world's reigning residual currency. If and when that happens, anything of U.S. dollar value will plummet.
Yes, that's very scary. That's exactly why major federal budget cuts can no longer be deferred to the future. The pain must begin now – with the Obama Administration's budget submitted to Congress this week.
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