WSJ says cutting subsidies would make ethanol more viable. Oh really?
The Wall Street Journal ran an article yesterday on “How Brazil Broke Its Oil Habit.”
The article attempts to draw lessons for the U.S. from the Brazilian experience, where sugarcane-based ethanol supplies 18 percent of the transportation market. The author, David Luhnow, seeks to apply “lessons from the sugar fields of Brazil to U.S. cornfields.”
The first problem I see here — and more scientifically sophisticated Gristmillers like biodiversivist and greenstork are invited to weigh in here — is that sugarcane seems a much more efficient way to create ethanol than corn. Ethanol is just alcohol, right? The process of making it means converting sucrose to alcohol. And sugarcane has a lot more sucrose, on a per-weight basis, than corn. Right? Thus it would require more energy input to create a given amount of ethanol from corn than it would from sugarcane. Someone please correct me if I’m wrong.
Secondly, Luhnow states that ethanol didn’t really take off in Brazil until the government stopped subsidizing sugar farmers. This moves him to write:
A Brazil-inspired ethanol program would mean ending government support for U.S. corn and sugar farmers. That would probably raise prices in the short term, as less efficient U.S, producers failed, but eventually help lower the price of the crops, as more-productive farmers stepped in, agricultural analysts say.
He never names said analysts. Now, this sounds like free-market cant to me. How cheap can corn get? Farmers have produced record crops the past two years. Last time I checked, giant piles of unsold corn dotted the Iowa landscape. Archer Daniels Midland recently reported record profits — fueled (like U.S. ethanol itself) by cheap corn.
The price of corn has been falling for decades. Even with the subsidies, low prices have pushed the marginal producers out. End the subsidies and a bunch of producers fail — driving the price of corn up. The “more-productive farmers” the author says will step in and drive the price down don’t exist, in my opinion. Only the most-productive farmers will survive.
My opinion stands: The subsidy program is a sop to ADM and other ethanol producers. Take it away, and corn-based ethanol will only need more tax breaks and other goodies to survive.