Stuck on Corn
Rob Price

Do you like the taste of beef?

Pork? Chicken? If you do, get ready to pay more at your local grocery story. The cost of livestock is rising, according to the U.S. Agriculture Department.

And there is a simple explanation: The cost of corn has risen $2 per bushel over the past year. That's because a larger share of the overall corn crop is being used in the production of ethanol. The Associated Press reports domestic ethanol production consumed 20 percent of last year's corn crop. This year, ethanol producers are expected to grab about 25 percent of the crop.

The country's gradual adoption of ethanol as an alternative fuel is an encouraging development. But our nearly exclusive use of corn as a base for ethanol is going to be bad news down the road. Corn and corn byproducts are a staple of our mass-produced food supply. Corn-based fructose is the principal ingredient in the soft drinks we consume; corn is the main feed for the livestock we raise in the huge agrifactories of the midwest. The use of this basic staple to feed the country's ethanol hunger will drive up prices throughout the food chain.

Fortunately, I have a simple solution to this problem: the elimination of the 54-cent tariff on imported ethanol. This tariff targets ethanol imported from Brazil, where sugar cane, instead of corn, is used as an alcohol base. Sugar cane can be transformed into ethanol at a fraction of the cost of processing corn. The U.S. ethanol market would quickly abandon corn, and the country's farmers could go back to raising the crop for livestock and the Coca Cola company.

Is this a plausible scenario? My hopes rose last week, as I listened to news reports of President Bush's meeting with Brazil's president, Luiz Inacio Lula da Silva. The two presidents were discussing ways of increasing the production of ethanol in Latin America; what better way of increasing production than opening the huge U.S. market to Brazil's sugar cane-based product?

But my hopes were dashed when I heard President Bush say flatly the elimination of the ethanol tariff wasn't even on the table. The president bluntly told a reporter the business of tariffs belongs to Congress, and this Congress would not be looking at the tariff issue before 2009.

What are the chances of Congress eventually eliminating the ethanol tariff?

Not good, according to the news reports I've read. The New York Times recently quoted a letter from U.S. Sen. Charles Grassley to President Bush in which Grassley asked "why the United States would consider spending U.S. taxpayer dollars to encourage new ethanol production in other countries."

Grassley represents the state of Iowa, which aside from a few cities is basically a large cornfield. It also is the home of the country's first big presidential primary contest; don't expect ambitious senators and hometown boys to run astray of this state's major industry.

But there may even be some ways around this problem. Caribbean countries and countries that signed onto the Central American Free Trade Agreement are exempt from the ethanol tariff if they make alcohol from their own sugar cane, or import Brazilian ethanol for final processing before shipping it to the U.S. Apparently, Presidents Bush and da Silva had this roundabout scheme in mind when they discussed ways of increasing ethanol production in Latin America.

The other way around the ethanol tariff is to develop domestic alternatives to corn as an ethanol base. President Bush seems to have this in the back of his mind, because every once in a while he says something about "switchgrass" - a cheap crop from which cellulose can be extracted and converted into ethanol.

The technology for cellulosic ethanol, however, is in its infancy. Meanwhile, sugar-based ethanol is a proven winner, and Brazil is transforming its economic infrastructure through its role as Latin America's leading ethanol exporter. Wouldn't it be great if the U.S. could start growing sugar cane in its southern states and building its own sugar-based ethanol plants?

And wouldn't it be great if pigs could fly? This country's food market already is dominated by the midwest agribusiness community; now we are giving those same interests a disproportionate leverage over our energy market.

Just think about that every time you hear the presidential candidates talk about corn and ethanol. They're on their way to Iowa.