Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.

Food, Fuel, and Farming

James Skillen


January 4, 2008

At the start of a new year and with voters now beginning to have their say in the presidential campaign, let’s talk frankly about some basics.

The cost of food in much of the world is rising dramatically due in large part to record prices for wheat, rice, soybeans, and corn. The high commodity prices are due to poor harvests, growing demand, and low stockpiles. In some respects, the rise in food prices is also due to the diversion of more and more American corn to ethanol production, which is supposed to help us cut back on imported oil. But the demand for oil both here and around the world has continued to increase.

Add to this the closely intertwined factors of growing carbon emissions that are contributing to global warming, the economic burdens on the poorest countries because of higher costs for imported food and oil, and federal subsidies to American farmers that hinder agricultural exports from poor countries.

Government policies cannot stop droughts and floods, nor can they suddenly change the structure of the economy. But there are aggravating inconsistencies in public policies that the new administration and the next Congress should overcome.

First, consider the domestic push for ethanol production to alleviate dependence on oil. While it is wise to encourage the development of alternative (including renewable) energy sources, it is foolish to imagine that a minor biofuel supplement to gasoline will help move us away from dependence on oil. Corn-based ethanol and other biofuels now account for less than three percent of transportation fuel used worldwide, and even if all of America’s corn were diverted to ethanol production, one recent study estimates that it would supply only about 12 percent of U.S. transportation fuel (Robert Samuelson, “Food vs. Fuel,” Washington Post, 12/12/07). Supplementing gasoline with ethanol will barely keep pace with increased demand for gasoline and will likely deepen oil dependency by creating a false sense of progress.

Add to this the fact that the diversion of corn to ethanol production is one of the causes of increased food costs. What happens when there is a bad harvest year for corn as there was for wheat this past year? Competition between food producers and ethanol producers for corn could drive the price sky high.

Don’t stop there. One of the worst things about Washington’s latest farm bill is the extent of its subsidies for farmers (of many commodities, not only corn) and ethanol producers. It might make energy sense if the federal government offered an equitable investment subsidy or tax break for every effort to develop alternative fuels that would reduce carbon emissions as well as dependence on oil. But agricultural and energy policies now subsidize biofuel production (especially ethanol) in a disproportionate way that greatly distorts market forces. Those distortions will only hinder the development of alternative fuels that do not compete with food production.

Not only do our farming and energy policies contribute to rising world food prices and to continuing dependence on fossil fuels, they also affect the economies of those poor countries that rely on commodity exports for their income. With one hand Washington has worked to reduce and forgive third-world debts and to channel more aid to poor countries. With the other hand, however, its subsidies for American farmers (way beyond what is needed for insurance against catastrophes) have made it difficult or impossible for third-world farmers to export their crops at a competitive price. The federal government spends billions more dollars unnecessarily subsidizing well-to-do American farmers than it does encouraging economic self-sufficiency in poor countries.

In this election year, ask the presidential candidates and those running for Congress to stop the foolish, market-distorting policies that push up food prices, encourage the growth of carbon emissions, and disadvantage farmers in poor countries for no good reason.
—James W. Skillen, President
    Center for Public Justice

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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”