Tuesday, August 28, 2012

Free (corn) Markets

Just incase you’ve been living under a rock for the last 3 months or so, the Midwest, hell, the whole country, has been gripped by a massive drought, which has crippled yields, especially for corn and soybeans. In fact, the crop failures are so massive, that corn and soybean “futures” (prices) have reached record levels; and those costs, unfortunately, will in some way be passed on to the consumer. 

It’s not that we want to charge you more, but our hands are tied. The corn cattle and chickens eat is more expensive; same goes for the soybeans that pigs and dairy cows consume. And then, there’s the pink elephant in the room: 


Many, many grain famers, like myself, sell some of their corn for ethanol production. Now, there is a by-product, called DDG, that is fed to cattle in place of “whole” corn, so it’s not a total net-loss for feed. However, that hasn’t stopped several livestock groups and some producers from calling for a “waiver” for the amount of ethanol the government says we need to put into our gasoline.

Now understand, I’m writing this from the perspective of a grain farmer; but I’m also writing as a consumer of meat and dairy products. What I have the biggest problem with, in this whole “waiver” debate, is that the government is picking winners and losers, and when that happens, we all loose.

If we allow the government to shut down ethanol production to satisfy the demands of livestock producers, then what about the inverse? When corn prices crash, can we demand an increase in ethanol to prop up my industry? How about then dairy prices drop; should we control supply with a national quota system? The same quotas could apply to pigs, turkeys, ect. 

If we head down this road today, we are asking the government to take away our rights to free markets tomorrow. 

I’m not going to propose a solution to this issue; I know folks at all corners of this table who are struggling, and who have strong opinions. The larger question I simply want to ask, is, are we as farmers and ranchers ready to give the government this much control over the principals of free market economics that we all thrive under??

Jeff VanderWerff is a 4th generation fruit and grain farmer from Sparta, Michigan. To learn more about his family farm, and the drought, visit www.youtube.com/agsalesman


  1. You mentioned allowing the government to "shut down" ethanol production. From the dairy perspective/bias is removing the ethanol mandate or subsidy the same as shutting it down?

    Great post, I think touchy subjects are the most interesting.

  2. Joshin,

    Thanks for your feedback. I think the biggest issue is that some livestock folks are essentially asking for a domestic grain embargo. I can't support a group asking the government to put its needs before another groups needs, when both are on equal footing.

  3. An interesting item I picked up at a meeting a couple weeks ago. A grain marketer was speaking. He said that even if we eliminate RFS completely ethanol production wouldn't decrease by much. Many types of crude oil end us as 81 octane when they are refined. Ethanol would still be the cheapest was to bring that number up to 87, etc. The other additives still cost more than ethanol at this time. I had not heard of that before this meeting.