King Corn

Odd approach to this story, which reads like it was written by the Ethanol Producers Association. Basically, corn farmers are "beleaguered" all the way to the bank.

A phone call to Tim Recker, president of the Iowa Corn Growers Association, found him in his combine, harvesting the last of a bumper crop.

"I got 225-bushel corn that I'm doing right now, which is phenomenal," Recker said by cellphone from a field near the town of Arlington. That's 225 bushels per acre. For a corn farmer, that's living in the tall cotton.

And yet, despite the fabulous harvest and the boom in ethanol made from corn, corn farmers often sound beleaguered and aggrieved. Corn, they say, has been getting a bad rap.

"You have to wear a flak jacket," said Bill Couser, who farms 5,000 acres here in the central Iowa town of Nevada (pronounced ne-VAY-da). "When we planted this crop, people said we were the villains of the world."

This mundane plant, once arguably dull as dirt, its name useful as an adjective ("corny") to describe something kind of lame and hillbillyish, has become improbably controversial. The gist of the criticism: So much corn, doing so many things, serving as both food and fuel, and backed by billions of dollars in government subsidies, has been bad for America and the rest of the world.

No mention in the story of this.

The cost of everything from tortillas to cereals and cornstarch will rise in Canada because America's policy of subsidizing ethanol to cut dependence on foreign oil has led to rising demand for corn, says a report.

Corn-based staples such as tortillas have become more costly, along with other grains, fruits and vegetables that are pushed aside as farmers cash in on corn, said CIBC World Markets' chief economist Jeff Rubin.

"When you add it all up it's fairly significant because food inflation is already well over four per cent and we would expect it to move higher as more and more corn production is diverted to ethanol as is required under President Bush's plan," Rubin added.

"When you overlay that with the inflationary hit from oil itself, they're going to produce the hottest inflation numbers that we've seen yet this cycle."

The U.S. federal and state governments provide massive subsidies - $8 billion last year - to encourage ethanol producers to expand and corn farmers to supply the crops to help make the fuel.

Or this.

Recent declines in ethanol prices have sharply reduced profitability for ethanol producers, USDA’s chief economist Keith Collins told the House Agriculture Committee last month.

Speaking at a hearing on disaster conditions across the nation on Oct. 18, Collins noted that ethanol prices have weakened since mid-summer as additional plants have come on line, adding to ethanol supplies and contributing to some infrastructure bottlenecks.

For example, prices at ethanol plants in Iowa and Nebraska have fallen nearly 50 cents per gallon since late July 2007. During the same period, futures prices on the nearby contract have lost about 40 cents per gallon.

Until recently, ethanol premiums have averaged 50 cents per gallon compared with unleaded gasoline. The situation has suddenly reversed, with wholesale ethanol prices as much as 39 cents per gallon below the wholesale price for gasoline during September.

The outlook for ethanol prices appears even less favorable in the futures market, with the nearby Chicago Board of Trade contract for ethanol trading 50 cents per gallon below the nearby New York Mercantile Exchange contract for reformulated gasoline blendstock.

This shift in the ethanol-gasoline price relationship has sharply reduced returns for ethanol producers, according to Collins. “With current retail gasoline prices at $2.80 per gallon, wholesale prices without federal and state excise taxes would be about $2.20 per gallon. Nearby futures for ethanol are trading at $1.57 per gallon, 71 percent of the $2.20-per-gallon estimated wholesale gasoline price and about equal to ethanol’s energy value relative to gasoline.”

U.S. ethanol production capacity for today is estimated at 6.9 billion gallons, up 2 billion gallons from a year ago. Production capacity is expected to increase sharply over the coming 18 to 24 months, if the 76 plants currently under construction are completed.