Race to the bottom, fueled by Ethanol !
I recently received this anonymous comment attached to an old post on ethanol:
For you Sherlocks exploring the curiosities of farm economics and power, why not check out Melvin Schramm (corn farmer) letter to the The Forum of Fargo-Moorhead, North Dakota (November 8, 2005) entitled "Corn Farmer Left Out of Ethanol Benefits". Curious Schramm doesn't mention ADM - the agribusiness behemoth which virtually controls the ethanol sector - by name but does question the "ag commodity groups" (which are all virtual toadies of ADM as well) The solution cannot be more welfare checks since the cupboard is almost empty - so is this the beginning "Death Rattle" for the American corn farmer?
The original letter:
Melvin Schramm letter: Corn farmer left out of ethanol benefits
Published Tuesday, November 08, 2005
I found the articles in the Oct. 23 Forum about ethanol production and consumption, whether it was E-85 or some other blend, very interesting.
However, it seems someone has sold the general public a bill of goods. A number of people interviewed for these articles said at least using ethanol blends helps the farmer. What a terrible misconception! Can anyone explain to me how ethanol production helps the farmer when the price these plants pay for the corn is less than the cost to produce this corn? Right now, you as taxpayers are subsidizing the corn producers with loan deficiency payments of about 50 cents per bushel because the market price for corn is so low.
It amazes me that commodity groups like the Corn Growers, Soybean Growers, and Wheat Producers think having a market is the most important thing for a producer. I agree having a market is very important, but if it doesn’t return enough to cover the cost to produce the product, it isn’t much of a market.
All the free trade agreements the United States is pushing for are designed to give us access to another market where we can join the race to the bottom to value the product. The problem is when we undercut every competitor to get this market, everyone benefits except the producer. When we sell cheap grain, for instance, the elevators charge the same rate to handle the grain, freight rates stay the same, all the other entities involved with the sale make the usual, but since the final price is cheaper, only the producer takes a cut to make the sale.
We have too many people that think if we produce more we can sell it for less, regardless of the fact that fuel is over $3, anhydrous ammonia fertilizer more than $500 a ton, and all other costs continue to increase.
I am a firm believer in the production of renewable fuels, but the farmer must get a fair share from the market. The petroleum industry is making record profits that before were unheard of and the farmer needs a welfare check.