Macroeconomic Implications of Large Scale Ethanol Production in the U.S.

The following is from Survivablog:

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Hi Jim
I have run across some information that I thought might be of interest. I am in the food business and come in contact with a lot of people in the food industry.

One of my associates is in the frozen fruit and vegetable business. He has been telling me the effect that W's ethanol incentives are having on the agriculture industry and it is quite alarming. I have not
researched this, so don't have facts and figures to back it up, so take it for what it is worth.

This situation seems to have mysteriously stayed out of the mainstream media and the only thing that I have seen about this is that tortilla prices in Mexico have risen drastically because so much
corn is being grown to produce ethanol and the Mexican guvmint is trying to use price controls on corn.

There is a lot more to it than that. Apparently, the guvmint has made it so attractive to grow corn and soybeans for ethanol that a lot of farmers are switching out of other crops in order to grow corn
and soybeans. There are a couple of reasons for this. You get a guaranteed price. I have never been a farmer, but I know enough to know that that is unusual for a commodity. The farmers also get more money for the corn and soybeans going to ethanol production than they would selling it for feed. Corn and soybeans are not only used to feed cattle but also pigs, chickens and turkeys. This means
that cattle ranchers, turkey farmers, pig farmers and chicken farmers are having to pay more for feed.

The other attractive thing about this for farmers is that if you are growing corn, it doesn't matter what the quality is, if it has some type of fungus or blight or has turned brown. They pay the same money
for all of it.

The effect that this is going to have on the food business is very far-reaching. A lot of farmers are now switching over to corn and soybeans. Case in point is peas. Peas for canning and freezing were very short last year and are expected to be short again this year. The reason? Fewer and fewer farmers are growing peas because they can make more money growing corn and soybeans. Remember,
farming is no longer like the painting, "American Gothic". It is agribusiness run by the likes of Cargill, ADM, etc. They go where the money is.

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Commentary

Seems to me that Liberals do not understand economics, and insist that reality be changed to suit their beliefs. They believe in a Command Economy, and in Government Power, despite the obvious failures of every great socialist experiment.