How much would corn cost if the completely insane policy of diverting large amounts of it to ethanol production?
It may be insane from a purely scientific point of view, but that doesn't tell the whole story. If you recall from around the 2006 timeframe, before the energy policy changes, we were swimming in corn. It was coming out of ears, sitting in massive stock piles doing nothing, and more was coming in each day. Even if you say ethanol is ultimately energy neutral/negative, it was still energy ripe for the taking.
Now the problem, even if you take away the subsidies, is that corn is still an important crop in a grain farmer's rotation. Looking back on the 2006 timeframe again, you might remember the farmers here in Canada losing their shirts over their corn production (we don't have the subsidies). But they still grew it, because there was no reasonable alternative. Not even leaving the fields fallow was an option, as the banks wouldn't hear of it (a loss on corn is smaller than the loss on no crop at all).
I've heard some suggest that farmers grow other crops instead of corn, which sounds good in theory, but those other crops require additional multi-million, even multi-billion, dollar outlay of new equipment and infrastructure to get started. Farmers are already operating on thin enough margins that it is financially impossible. It is cheaper to just take a loss on corn for the year.
It is just not clear to me what the alternative is, especially to maintain sustainable food production of other crops. It is far more complex than just the science of ethanol.
Rule of thumb in the area where my family lives, Hamilton County in Nebraska, is that 1000 acres will be required to financially support a family of four. Land has sold within the last four years from $6K to $10k per acre. Therefore, using the low number, one family will need to be able to raise crops on $6,000,000 worth of land by owning or leasing the ground.
We haven't gotten to equipment yet. Center pivots start at $35K, tractors are about $100K, combines are $250K. We still need heads for the combines for each crop raised, and of course plantering, fertilizing, cultivating, ridging, and discing implements to tend the land. Figure $25K apiece. Add 15% if they're the proper shade of green.
I could keep going, but you get the point, hopefully, that farming is an extremely expensive enterprise with relatively low margins.
"Should" it be that way? With respect, what ag should or should not be isn't irrelevant. It is that way, and this is not a function of ag but rather a function of an industry working to supply demand.
Ag is not remotely unique in the assets that are required to operate. Watch the first season of How It's Made on Netflix and be amazed at how much expensive mechanization and automation is required to make something as simple as a work boot.
This is perhaps what happens when your housing bubble has a knock-on effect on land values and those in turn drive up the cost of doing business for the farmer.
The equipment today is outlandishly expensive. While the equipment is well made, there's surely room for innovation. Just as we can apparently find ways to send things into space for a fraction of the conventional cost, there has to be a way to make a combine harvester, or something functionally equivalent, for less than a quarter million dollars.
Well, what is the alternative to that? You could replace the expensive machines with human hands, perhaps, but nobody is willing to do the work. Farmers already struggle to find help as it is. With some skill, you can make programmer-like salaries as a farm hand on the right farm right now, and they still can't fill the positions.
It may be insane from a purely scientific point of view, but that doesn't tell the whole story. If you recall from around the 2006 timeframe, before the energy policy changes, we were swimming in corn. It was coming out of ears, sitting in massive stock piles doing nothing, and more was coming in each day. Even if you say ethanol is ultimately energy neutral/negative, it was still energy ripe for the taking.
Now the problem, even if you take away the subsidies, is that corn is still an important crop in a grain farmer's rotation. Looking back on the 2006 timeframe again, you might remember the farmers here in Canada losing their shirts over their corn production (we don't have the subsidies). But they still grew it, because there was no reasonable alternative. Not even leaving the fields fallow was an option, as the banks wouldn't hear of it (a loss on corn is smaller than the loss on no crop at all).
I've heard some suggest that farmers grow other crops instead of corn, which sounds good in theory, but those other crops require additional multi-million, even multi-billion, dollar outlay of new equipment and infrastructure to get started. Farmers are already operating on thin enough margins that it is financially impossible. It is cheaper to just take a loss on corn for the year.
It is just not clear to me what the alternative is, especially to maintain sustainable food production of other crops. It is far more complex than just the science of ethanol.