This year's drought has already raised wholesale corn prices dramatically, and consumers will likely soon feel the pinch at the grocery store checkout. Economists are warning of a 3-4 percent rise in food prices this year and next as well, an especially poorly-timed circumstance given the recent weakness in the economy.
Nobody is feeling this pain more sharply than Maryland's poultry producers, who have traditionally relied on corn above all else to feed their chickens. They have called on theU.S. Environmental Protection Agencyto reduce or waive the so-called ethanol mandate or "Renewable Fuel Standard," a 7-year-old requirement that will result in 40 percent of the U.S. corn crop being used in the production of biofuel.
While we have had our differences with the poultry industry and their views on the EPA and the enforcement of Clean Water Act standards on poultry litter disposal, they are right on target on ethanol. Corn may be regarded as an important resource to ethanol producers, but it is vital as animal feed, and that needs to be the higher priority.
Government can't regulate rainfall, but putting so much corn back on the market would likely soften the effects of drought on food prices, particularly meat. This would represent more than a mere convenience to consumers. It's also likely to save lives and spare human suffering as high food prices in a depressed economy could lead to food scarcity and malnutrition.
The Obama administration may be reluctant to take action in an election year, however, primarily because some farmers are quite happy with high grain prices as a way to offset poor yields this season. And it's not just corn producers who benefit from the ethanol mandate. Those who grow other grains and soybeans are seeing higher prices, too, because of the shortage of corn. Lift the mandate, and prices for those crops are likely to fall.
But grain production is actually one area of the U.S. economy that has fared decently in recent years, and a one or two-year lifting of the requirement is unlikely to be disastrous for that sector. Prices won't fall through the floor but will simply revert to true market standards.
A waiver might also allow the federal government a pause to reevaluate its renewable energy policies and whether devoting so much of the corn crop to ethanol production (13.2 billion gallons) is truly in the nation's interest. Certainly, it's a dubious investment that does not lower the price of gasoline or reduce U.S. dependence on foreign oil, and its environmental benefits appear to be oversold.
The sooner the EPA acts on corn ethanol, the less likely jobs will be lost in the livestock industries. It's not just Maryland poultry farmers who are likely to feel the pinch but the dairy industry, too as well as pork and beef growers.
Meanwhile, Congress needs to take action to extend help to farmers who are suffering through what may be one of the worst droughts in a half-century. But disaster assistance should not come out of the pockets of much-needed conservation programs — as House leaders are seeking to do through a one-year extension of the farm bill.
Disaster aid of all types should not be held to arbitrary budget-balancing standards. No emergency spending should be. If the House wishes to trim farm-related spending, there are plenty of direct payments to farmers and outdated and costly price support programs from which to choose.
With the U.S. economy already suffering the effects of Europe's financial woes, the last thing the country needs is for poultry producers like Maryland's Perdue Farms to hit the skids and for grocery prices to spike. Either the EPA or Congress must act to put more corn in the nation's feed bag or that's exactly what is bound to happen.