PlanetHolt.com

Dad sent me a pretty interesting white paper from the National Pork Producers Council this morning which discusses the crisis underway in the US pork industry. I attached a copy of the paper to this post, but I thought I'd mention a couple points I found particularly interesting. (If anyone can find a link to the original, I'd rather use that than host a copy myself, so please let me know.)

Pork is clearly an important industry, not only to the mid-west, but to the entire country. It accounts for hundreds of thousands of jobs and contributes billions of dollars to the economy. The industry has seen tough times before, but these conditions have traditionally been caused by either overproduction (an unsurprising reaction to strong hog prices) or adverse weather conditions causing input shortages. This crisis is different, however, because the losses are being caused by high input costs (mainly the high cost of corn), which have been significantly affected by the craze for corn-based ethanol.

The high demand for ethanol is creating a link between the prices of oil and corn that has not been seen before. Under the current working assumption that corn-based ethanol is “green” (an assumption that is certainly being challenged), good for US farmers (also being challenged), and thus worthy of government support, conditions are ripe for the continued expansion of ethanol production.

Ironically, a major underlying intention of the U.S. bio-fuels policy was to strengthen the independent midwest farmer; the unintended consequence of this policy will be to hasten the departure of the independent pork producer from the business.

Given that our policies intended to reduce carbon emissions thru the use of “green” fuels while supporting the US farm economy, and that it appears that neither of these goals are actually being attained, it seems clear that we need to change our current policies. (Interestingly, John McCain has been saying for years that corn ethanol production is a silly thing to subsidize. He didn't campaign in Iowa in the 2000 Republican primary for this very reason. I have not decided for whom I'll vote in November, but it looks like he's going to end up looking pretty good on this issue.)

There is also significant weather uncertainty due to a late/wet spring for planting the crop and the risk of drought. The U.S. corn belt has historically had a drought every 19 years, with the last major drought in 1988, 20 years ago. Further, drought in the Midwest is frequently preceded by one year by drought in the Southeast – which happened last year. Producers and their lenders are very concerned about having physical access to corn to feed their live stock.

If we do end up having a serious drought this year, it could have a significant impact not only on the US farmer, but on those who rely on the food we produce around the world. Considering we're already seeing food riots in the third world even with record production levels, anything that significantly cuts yields would be devasting.