Corn

Corn

Corn Syrup is found in most everything. It is high in calories, low in nutrition. It is found to be the main culprit in childhood obesity, in obesity in general and in nutrient poor diets. The corn itself is used not only in many food products, but also in ethanol and is also used in feed for livestock. It is a main staple in America and is a cash crop. As a cash crop it generates a great amount of money for agribusiness, especially as corn syrup, but not so much for the smaller farmer. Two of the largest agribusinesses in the world are Archer Daniels midland and Cargill. Agribusinesses like Archer Daniels Midland and Cargill generated an estimated 69 billion and 110 billion dollars respectively in 2009 in large part through the growing, packaging and selling of cash crop products. These products would include corn syrup and ethanol. Unfortunately corn syrup is a critical component in rising obesity rates. It costs us health care dollars to treat the obesity caused by high calorie, low nutrient products made with corn syrup and finally it costs us because we subsidize to the industry to grow the corn used to make the syrup and ethanol. Amazingly, we as the American consumer subsidizes ADM and Cargill for growing the corn they use to produce the corn syrup found in most our foods.

Why do we allow two companies such as ADM and Cargill whose revenue tops 69 billion and 110 billion dollars respectively tax breaks and subsidies from our own taxpayer wallets? The answer is that they are good at playing politics. Unfortunately, not many companies have mastered the iron triangle of Congress, interest group and bureaucracy like ADM. It has shown great expertise in turning government policy to its advantage and Archer Daniels Midland has been doing it for over 40 years. As early as 1973 Earl Butz, President Nixon’s Agriculture Secretary, removed the old traditional policies of farm price supports, which included limiting production of corn and other major commodities, to encouraging farmers to produce as much as they could. This was regardless of market or prevailing price. Afterwards the United States government began to pay the subsidies directly to farmers to make up the difference between the market price and what it considered an appropriate floor price. The end result was to sharply drive down the market price of corn. This then resulted in a cash windfall for very large agribusinesses who at that time owned a large amount of farms and were technically the owners of those farms. To some extent this is why corn and many corn type products, such as corn syrup, are found as major ingredients in our food products, because more corn at a cheaper price means more you need to sell. However, if you sell all that corn you will make a fortune. If you sell it as corn syrup you will make that much more. Much later on this kind of congressional subsidy was re-created for ADM when congress authorized tax credits for ethanol created from the corn that Archer Daniels Midland was already growing. In the 1990’s ADM gave 100,000 dollars to Bob Doles presidential campaign and also another 1.5 million dollars to the Republican National Committee to spend on that year’s elections.

Iron triangle

Iron triangle

Although Bob Dole lost the election he still remained an important Senator and so helped push through a 54-cent per gallon ethanol tax credit of which ADM, producer of more than 60% of America’s corn-based ethanol became the main beneficiary. Like the original corn subsidy they were being subsidized to grow corn, produce products from it and then sell it, which also created a profit. In the end at least 43% of ADM’s profits come from products subsidized by us, the taxpayer. This amounts to corporate welfare. Although ADM makes lots of money on corn syrup most of their money now comes from ethanol which we then use in our cars. This ethanol is mixed with gasoline and the result is gasohol. This 54 cent-per-gallon tax break and also paid by us the taxpayer even before we fill up our automobile gas tanks. This single tax gift/loophole accounted for over $10 billion in subsidies to ADM since 1980. To make matters much worse for us, gasohol is so inefficient that creating ethanol and then mixing it with gas is close to if not in fact a net destroyer of energy. Gas mixed with ethanol has also been found to increase hydrocarbon and nitrogen oxide output. Finally, the diversion of corn into gasohol raises corn prices between 22 cents and 40 cents per bushel.

Ethanol subsidies also cause market constriction for corn and thus promote world hunger. If 10 to 13 billion bushels of corn grown each year and much of it is diverted to the production of ethanol and not used as food, then the price of those food products that have corn in them will rise. This can cause global hunger and instability because poor countries that import corn to feed their public will purchase less. This occurred in 2008 when the price of corn price increased to $7.65 a bushel. What was the result worldwide? There were food and hunger riots in over 30 countries worldwide. The spike in the price of corn was caused in large part by the diversion of a third of America’s corn crop to ethanol production. The high price of corn that year as a result also effected other staples such as rice. Staples such as rice were affected by the high price of corn because those countries that depended on corn then banned the export of other grains because they needed to feed their people. The bans on grain exports then resulted in the shortage of other grains, thus propagating more hunger that year in those countries that depended on food imports like rice.

Of course smart policy professional will know that ethanol subsidies last year finally expired. But, in reality the EPA has recently signed off on the Renewable Fuel Standard established under Bush. The RFS rule provides incentives just as before for Agribusinesses to continue on growing very large tracts of corn for ethanol, which is then mixed with gas and sold to us at a higher price than gas alone to fuel our cars. Removing the tax credit, but keeping the Renewable Fuel Standard mandate that at least 37 percent of the 2011-12 corn crop be converted to ethanol and blended with the gasoline is actually triple what the pre-mandate level was, so in essence the Iron Triangle kept its power base. In other words it is the ethanol subsidy in another form. The combination of Agribusiness, Congress and bureaucracy is taking our tax payer money before and after product creation. Not only is Archer Daniels Midland profiting from tax breaks for growing corn but it is then profiting after selling the corn, corn syrup or ethanol. This type of political hand out as corporate welfare has created obesity through corn syrup , hunger through market price inflation, inefficient fuel through the creation of ethanol and is costing us taxpayer dollars. It is not true capitalism, not true business, is unethical and is poor policy.

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