So the Feds and the Big 2.5 have made a pact to focus on E85 for the better of the economy and to help save the environment. We all drive more eco friendly cars and the world is a better place, right? We all know the E85 cars get slightly fewer miles per gallons than their 100% fossil fuel counterparts do, but the fuel cost less and you can chalk it up to a wash in savings, so no real argument there.
But how else can E85 affect you? Last night a ABC news report showed me just how much this switch could cost.
After 30 years of subsidizes and a repressed market, Americas corn farmers are finally on the verge of a demand explosion. At over $4.00 a bushel, wholesale prices of corn have risen almost two fold in the last two years and the farmers can now actually make a real living by switching over to corn from less profitable crops. Hey I am all for the common man, and farming is an extremely difficult way of life, so on the surface I was all for the change, until the flip side arose.
The next scene shows a cattle farmer and his distress over the cost of feed grain on his cattle ranch. It seems the high price of feed corn is flipping the tables on him and running him bankrupt. This will cause the cost of red meat, milk and dairy products to rise as the bulk food source becomes expensive, poultry and pork are affected in similar ways. The E85 issue becomes complicated at the least. The cattle farmer tossed out the comment that this “E85 thing” wasn’t fully thought out in his opinion.
So a quick run over to the National Corn Growers Association website was in order. While a recent report indicated that food is relatively stable it did give an indication of the costs incurred if corn prices remain high.
A few examples of the hidden costs:
If pork chops would have cost the consumer $3.66 in 2009 without the increase
in corn prices, the retail price might now be $4.06 if corn prices stay in the $3.50
per bushel range.
If a gallon of milk would have been priced at $3.36 per gallon in 2009 in the
absence of higher corn prices, it might now sell for $3.88 per gallon if corn prices
stay at $3.50 per bushel.
Large eggs that would have cost $1.17 in 2009 without an increase in corn prices
might now cost $1.41 if corn prices remain at $3.50 per bushel.
So a savings of fuel are going to be offset with higher food prices. Obviously how much food you buy will affect you more, but obviously those with families will be affected to the highest degree.
While true costs of E85 are yet to be seen, the worst case scenario might also include the diversion of corn exports for fuel consumption, leaving a valued world resource at risk. The report also failed to mention the true costs of farmers switching from wheat and other grains to grow more profitable corn and the effect that a short in these key grains might have. Will the price of a loaf of bread rise to $5.00?
So what are you thoughts? Was E-85 the way to go, or have we replaced one problem with another?
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