The Corn Supremacy

drought revives food vs. fuel debate

by by Barry Elkinton

illustration by by Diane Zhou

On September 10, Congress returned from summer recess, and both parties began the typical campaign season ritual of political posturing and legislative inaction. But if serious discussion about the debt ceiling crisis and tax policy can be conveniently scheduled for after the election, one issue is so pressing that it is defying the election-year schedule—American agricultural policy. Though not normally a hot-button political item, the worst drought in fifty years and the impending expiration of the Farm Bill has pushed food to the forefront of the political agenda.

While the spectacular wildfires that ravaged the western United States made headlines all summer, a quieter process of destruction has swept across American farmland. So far, more than half of all US counties have been declared national disaster areas as a result of the drought, which scientists say is the worst in over fifty years. “You couldn’t choreograph worse weather conditions for pollination,” University of Illinois-Urbana biologist Fred Below told Bloomberg Businessweek. “It’s like farming in Hell.”

Unfortunately for American farmers, the breadbasket states that produce staples like corn, wheat, and soybeans have seen the most arid conditions. An estimated 87 percent of corn acreage lies in drought-affected areas, many of which saw only marginal relief from the rains of Hurricane Isaac. As a result, federal officials say they are expecting the lowest corn yields since 1995 and record-high corn prices of over $8 a bushel. The disappointing harvest will not only lead to higher prices at the supermarket, but may also have international humanitarian implications, since many of the world’s poorest areas depend upon cheap American grain for subsistence.

This sudden tightening of the corn market has breathed new life into the ever-lingering food vs. fuel debate over the wisdom of using corn to produce ethanol. Especially controversial is the Renewable Fuel Standard (RFS), the federal requirement that an annual quota of ethanol be added to gasoline fuel. Created under the Energy Policy Act of 2005 and further expanded in 2007 the RFS sets increasing annual quotas for ethanol production through 2022. Passed with bipartisan support, lawmakers argued that the RFS would cut greenhouse gas emissions and reduce American dependence on foreign oil. For the upcoming year, the RFS requires 13 billion gallons of ethanol to be mixed with American gasoline—an amount that will require an estimated 40 percent of this year’s corn harvest.

But a growing group of lawmakers, industry groups, and NGOs are starting to question whether it makes sense to maintain such a rigid standard in a period of unprecedented drought. Specifically, these groups are urging Environmental Protection Agency administrator Lisa Jackson – whose agency is responsible for implementing the RFS – to use her emergency powers to waive the standard for this year. On August 20, after eight governors, 33 senators and 156 members of Congress formally petitioned the agency, Jackson announced that the EPA would consider granting the waiver. Jackson subsequently opened up a 30-day public comment period, and announced that the agency will reach a decision within 90 days.


The campaign to reduce ethanol production has united a group of strange bedfellows while leading to unusual division within the agricultural community. In Washington, the most influential opponents of the RFS are meat and poultry producers, who argue that ethanol quotas artificially tighten demand for corn, thereby making animal feed more expensive. “We do not stand for federal mandates picking winners and losers,” said JD Alexander, President of the National Cattleman’s Beef Association, in an interview on the association’s website. “This isn’t rocket science. Let the market work.”

Of course, there is a certain irony to any sector of the agribusiness industry –where government subsidies are the name of the game – calls for a return to free market conditions. After all, it was just a few weeks ago that the USDA announced it would effectively bail out the meat industry by purchasing 170 million dollars of animal products to help farmers cope with rising feed costs. Nonetheless, politicians in states with large meat and poultry operations have vocally supported an RFS waiver. “The RFS may have been a well-intentioned effort to move our country toward energy independence, but it has, predictably, done more harm than good,” wrote Texas Governor Rick Perry to the EPA. “Any government mandate that benefits one industry to the detriment of millions of consumers is bad policy.”

Predictably, the ethanol industry and the major corn growing states are opposing any change to the RFS, claiming that the it’s vital to ensuring energy independence and keeping down gas prices. “Now is not the time for changes,” said National Corn Growers Association President Gary Niemeyer in a statement. “It’s working. The RFS is revitalizing rural America, reducing our dependence on foreign fuel, and reducing the cost of gasoline.”

But if the meat industry and corn refineries are primarily concerned about their bottom lines, global health and international aid agencies see the waiver of the RFS as a matter of human principle. The United States is the largest exporter of grain in the world, so an increase in domestic corn prices could have dramatic global implications. For these reasons, the World Bank, the United Nations and Oxfam have all called for a reconsideration of US ethanol policy. “This drought, combined with bad policies like ethanol mandates, has put the world’s poor on a collision course with a food crisis,” said Oxfam America Senior Policy Advisor Eric Muñoz in a statement. “Urgent actions, including waiving US mandates for ethanol, could calm markets and ensure that corn is available for food rather than fuel.”

In between all these claims is a murky web of facts and studies that both sides selectively draw upon to support their positions. The biofuels industry has touted an industry-funded study suggesting that ethanol lowered gas prices $1.09 per gallon in 2011, but a more recent MIT study found that ethanol’s effect was negligible. Regardless, Americans are paying a premium for ethanol through their tax dollars–$1.78 per gallon according to the Congressional Budget Office, though it should be noted that conventional gasoline receives its fair share of subsidies too.

Regarding food prices, there is some evidence that an RFS waiver would lead to decent reductions. A recent study by Purdue University, for example, estimated that waiving the RFS might reduce the price of corn 20 percent by next year. But that depends on whether or not granting a waiver would even significantly reduce the demand for ethanol. Almost one third of the country has local laws requiring ethanol-blended fuel, meaning that many oil companies might just continue adding ethanol anyways. Still, the vigorous protest of the corn and ethanol industry to a waiver suggests that the RFS remains vital to propping up the ethanol industry.

Ultimately, if one thing is clear, it’s that this problem isn’t going away. So far, 2012 has been the hottest year in America since the National Oceanic and Atmospheric Administration (NOAA) began keeping records in 1895, and scientists say massive droughts are more likely as climate change continues. Meanwhile, with oil reserves dwindling, many are looking towards biofuels as the next best option for fueling America’s vehicles. But as the relationship between global warming and this summer’s drought shows, it can’t be as simple as substituting one fuel for another. Rather, our ability to adapt to climate change will be heavily impacted by climate change itself. Whether this summer’s RFS waiver dispute will result in meaningful changes to ethanol and energy use policy remains unclear; either way, climate change will increasingly demand these kinds of national conversations.