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Good works usually come at the expense of something else

May 06, 2007|By TIM ROWLAND

For those whose ultimate vision of rural Washington County is rippling fields of ripening corn, this ought to be a good year. Thank ethanol.

Those who enjoy a good chicken-salad sandwich on wheat toast should brace for higher prices. Blame ethanol.

World commodities are fickle things. Or at least their prices are, and everything from a carelessly spoken word to a heavy-footed government program can send them for a loop - intentional or otherwise.

This week the price of a barrel of oil hovered around $65. About $15 of this does not pay for exploration, pumping, transporting or refining. It is the cost of fear.

Traders, concerned as much with the price of oil tomorrow as the price of oil today, fear that hostilities in the Middle East or Africa could cripple supply, this is factored into the price.

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Iran depends on high oil prices to fund its nuclear programs. The United States opposes these nuclear programs. Yet every time the president threatens Iran, the price of oil goes up because oil traders fear that hostilities are more likely.

So these hostile words from the administration do two things: They drive up the price of gas at the pump and they fatten the treasury of the Iran, allowing its rickety government to remain in power, and also allowing it to invest even more money in its nuclear projects.

On the up-side, higher oil prices increase the viability of ethanol. And, theoretically, at least, decrease the number of illegal immigrants entering the United States.

The immigration problem in the U.S. has many sources, but curiously, NAFTA is a major culprit.

Intended to boost the economies of poor, Latino nations, it has also allowed millions of bushels of cheap, U.S.-grown and subsidized corn to be dumped south of the border. Since NAFTA, corn exports to Mexico are eight times what they were before.

Corn is the backbone of the Mexican economy, and farmers there couldn't compete against our artificially low-priced grain. Having lost their jobs, Mexican farm workers began to stream north.

So why are Mexican farmers raising their Tequila glasses in celebration today?

Let's return to ethanol.

Distilled from corn, ethanol is better known to West Virginians such as myself by its more common name: moonshine. In fact, even in its purest form, ethanol must be treated with a splash of gasoline, not for performance, but to discourage the town wino from filling up his car and himself at the same time.

This increased demand for corn has had a palpable effect on prices. According to Washington County Extension Agent Jeff Semler, the historic, 10-year average price for a bushel of corn is $2.45. This year, it briefly topped $4 a bushel.

Ethanol distillers swallow up copious amounts of corn, driving up the price and giving hope to grain farmers both in Washington County and South of the Border.

"At $3.70 a bushel, farmers can make a little money; at $3.45 they lose $90 an acre," Semler said. "This makes grain farming more profitable - short term. But my gut feeling is that it isn't sustainable."

With ethanol plants firing up right and left, and a healthy, 50-cent-per-gallon federal subsidy, the future might seem bright.

But nothing in agriculture is ever as it seems. Agriculture policy has a surreal, Alice through the looking glass quality to it, where up is frequently down and "what's good for one sector of agriculture is not necessarily good for another, Semler said.

Ethanol burns cleaner, it's higher octane, renewable and produced domestically.

So who could be against it? Try Frank Purdue and Jimmy Dean.

Distilling the alcohol out of corn leaves behind a grainy mush that can be fed to beef cattle - but, because of digestive peculiarities, not to pigs and chickens.

Higher corn prices increase the price of chicken and pork, but has less of an effect on beef. And, Semler said, prices being equal, most American consumers prefer the taste of beef.

So the chicken and pig lobbies are primed for a fight, taking aim at the ethanol subsidy that makes it a viable motor fuel.

And consumers might find any savings at the pump offset by increases at the grocery. Try to find a processed-food product these days that doesn't include corn syrup. It's this syrup, or sugar, that is extracted from the corn kernel for fuel.

Obviously, prices are inducing more farmers, locally and elsewhere, to plant more corn, and with the coming of biodiesel, soybeans won't be far behind.

The biofuel plant planned for Washington County will gulp 525,000 acres worth of soybeans, or about 21 million bushels. But Washington County farmers plant only 6,000 to 8,000 acres in soy, and many acres of beans in the region are already contracted to chicken farmers on the shore.

So the bulk will have to be shipped in from Pennsylvania or the Midwest by rail. It might seem cost prohibitive until you consider that the federal subsidy on biodiesel is $1 a gallon.

With corn and soy at a premium, where does that leave wheat, barley and hay? No doubt with fewer acres than are planted now. And when supply drops, prices go up, affecting the cost of everything from a loaf of bread to a bale of hay.

Certainly clean fuel and energy independence are noble goals. But fair prices for farmers and a plentiful and inexpensive world food supply are noble goals as well.

It's important to remember that they are all intertwined. And if you can figure out how to tie them all together with one big, harmonious bow, feel free to drop me a card.

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