The Comstock Report
Copyright 2006 @ CommStock Investments, Inc. - David Kruse

The Des Moines Register has been working hard now forsome time to help disseminate to the public every spurious, conjected, convoluted, embellished, exaggerated and egregious charge of criticism that has ever been leveled at ethanol. The ethanol industry’s rise to prominence has disrupted the status quo, displacing others in the established pecking order. Those comfortable with how things were being subsidized by below cost of production corn prices, food prices and farm income don’t like the change. The oil industry, in particular, has reacted much more violently as the realization occurred that ethanol wasn’t just a fad or passing fancy, but real competition that could threaten petroleum industry market share.

The idea that petroleum distributors will somehow voluntarily agree to sell E-85 is illogical, as it’s contrary to their special interests.

There has been a piling on from a coalition of special interests upset over ethanol that has subjected the ethanol industry to a pubic relations battle it was not prepared for. Food processors used the “opportunity” provided by the rise in corn prices and the ethanol industry as their alleged villain to justify their boost in prices, profiteering from the ethanol controversy.

The Des Moines Register has played along, aiding ethanol enemies with headlines like “Is This Ethanol’s New Victim?” over a bucket of popcorn. The price of the popcorn in the bucket was 1 cent. It is 2 cents when doubled. Yet the bucket of popcorn now costs 25% more and it’s all ethanol’s fault is the ridiculous assertion.

Truth is perception and the Des Moines Register has been helping ethanol’s opposition promote disinformation and misrepresentation of the ethanol industry and the resulting impact is that it becomes the truth at the local coffee shop. They’ll blame climbing cost of bakery goods or pizza dough on higher wheat prices. Food ingredient costs will go up 3% and they will raise prices 15%. Starbucks complained about the impact of rising dairy costs on its bottom line after raising its own cost by limiting purchases to Rbst-free milk.

That’s self inflicted stupidity. A CARD study says that a 30% increase in corn prices increases all food prices, 1.1%. So when you see food processors raising prices 10-25%, blaming it on ethanol or corn prices, they are lying through their teeth. I believe food processor costs have gone up but very little of it has to do with ethanol or corn prices. It has a lot more to do with rising energy costs and without ethanol, energy costs would be higher than what they are. Ethanol is contributing to aggregate fuel supply and the contribution the ethanol industry has made to expanding U.S. refining capacity, significantly lowering gasoline prices from what they would have been otherwise. The 1.1% increase in food prices attributed to ethanol was offset by lower prices at the gas pump. Add in the cost savings from the reduction in farm subsidy outlays by USDA from higher farm incomes and the taxpaying consumer is benefited.

Consumers don’t come out any worse for it all and we gain the benefit of becoming more self reliant on a portion of our U.S. energy needs. The profitability of the ethanol industry has benefited the U.S. rural economy instead of the Islamic OPEC community. We have one portion of the Islamic world trying to get rich off of us and the other trying to kill us.

Back focusing on ethanol, you still see bogus negative net energy studies cited as fact despite being discredited as trash statistics by real experts and authorities. You also never see the U.S. oil industry being held accountable for the hundreds of billions of dollars spent by the Pentagon to protect their foreign source of oil and transportation routes. The ethanol industry requires no such liability.

The ethanol industry’s environmental record will never ever represent more than a smidgen of the impact the oil industry has had on the environment. The ethanol industry is taking care of any problems or potential problems that have been identified, providing results using less energy, less water, leaving cleaner air, as well as a stronger economy. The more successful the biofuel industry becomes, the larger it grows as a threat to petroleum industry market share and the larger amount of feedstock the industry requires, competing with livestock interests for corn, the more the livestock industry resents losing their lock on farm subsidy perpetuating below the cost of production feed.

In other words, the more successful the biofuel industry becomes, the more powerful enemies ethanol makes. I’m quite sure that the piling on by ethanol foes seen in the media is not a coincidence but a coordinated, manipulated, skillful attack. I’ll put more transparency on that charge in a subsequent column. DK

Mr. Kruse is also president of AgriVantage Crop Insurance and Brazil Iowa Farms, an investor owned farming operation in Bahia, Brazil.(Futures Trading involves risk. Past performance is not indicative of future performance.) For information on subscribing to the daily CommStock Report, contact:

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