Monthly Archives: November 2010

Round#2

For those of you not on twitter, this afternoon’s blog post got some negative feedback in the twitter universe that highlighted some of my inherent bias that I may have, given my background.  I’ve never embarked on a debate in the social media realm but there is always a first time so here goes.

One assertion made was that as a Canadian, I do not support the creation of U.S. jobs.  Beyond the fact that I do not subscribe to the “we versus them” mentality, U.S. job creation is good for my business.  Roughly half of the pork produced in Canada is exported around the world and the U.S. accounts for over 30% of these exports (Stats taken from Ag Canada).  When the American economy suffers, so does the demand for the pork that I produce.  Furthermore, the price I receive for my pigs is based off the Chicago Mercantile Exchange, making our business vulnerable to currency fluctuations.  As such, the weaker greenback that has occurred during the economic downturn has further lowered the price I receive for my pigs while also making Canadian pork less competitive in the global market.  All in all, my family’s business has the best chance of succeeding when the American economy is firing on all cylinders.

The second point I’d like to talk about is the notion that I’m only interested in buying corn below its cost of production.  What I’m truly interested in is buying corn at a price that is at the equilibrium between the supply and demand for corn.  Domestic supports for ethanol in both Canada and the U.S. (we do have ethanol mandates here too) artificially boost demand for corn and thus inflates the price beyond what it would be if the subsidies were not available.

Finally, I would like to respond to the claim that my point surrounding food versus fuel has been debunked numerous times.  To do so, I’m going to call on my good friend Adam Smith (if you aren’t sure who AS is, take a peek inside any microeconomic textbook and you will probably find him) because in my mind, his rules pertaining to supply and demand make the ultimate case in the food versus fuel argument.  Simply put, any increase in demand without a corresponding increase in supply will lead to higher prices for the given good.  One of the reasons that we don’t see any dramatic rise in our food prices here in the developed world is because the majority of our diet consists of processed products in which the farmgate value for the corn plays only a miniscule role when determining the price.  Furthermore, we here in the developed world only spend around 10% of our disposable income on food, making us less vulnerable to price increases.  If we look at the developing world however, the majority of people still have a diet of raw unprocessed goods and in many places corn is the staple product.  These people can spend upwards of 75% of their income on food.  Even a small increase in price has a much more dramatic impact on the amount of food they can afford and since our grain markets have become globalized, it now means that a price increase here in North American can be felt by people all around the world.

So far, the content on my blog is fairly weighted to the con side in the ethanol debate but I would love for someone to challenge me with facts of their own. I would invite anyone to contribute in this space, I really hope that someone stands up and disagrees with me…as I said in today’s earlier post; I do love a good debate.

Getting “Fired Up” About Ethanol

Today I had my first ever mini twitter debate and I must admit that I enjoyed it a bit.  If you’ve ever met me in person you know that I love a good debate and sometimes I may argue a point just for the sake of a good argument.  This morning I was just killing time on the internet and was reading a couple articles about lobbying going on in regard to the expiration of a tax credit for ethanol blenders as well as a tariff on imported ethanol and it got me into a ranty mood and led to an anti-ethanol tweet that sparked the conversation.

Obviously, as a pig farmer, I’m not a big fan of ethanol because it has raised the cost of my biggest variable cost (feed) while also impacting the demand for land and other inputs.  Beyond the farmgate, my problems stems from the fact that without government support and usage mandates, corn based ethanol would not exist beyond the cottage industry it once was.  It is a lower quality fuel in comparison to conventional gasoline and we lack the infrastructure required to transport ethanol because it cannot be sent through our pipeline systems that have been developed for petroleum products.  Furthermore, there have been countless peer reviewed studies that show ethanol to be, at best, energy neutral in terms of the energy needed to produce ethanol versus the amount of energy that it can provide,  (in fairness, there have been peer reviewed studies that have found a positive net energy balance).  At the end of the day, taxpayers are supporting an industry that makes their food more expensive under the guise that it is cleaner and will reduce foreign oil dependence; shaky conclusions that lack consensus in the research community.

But my loathing for ethanol goes far beyond the aforementioned reasons.  I find it morally unacceptable that we are burning food in our cars when there countless millions around the world and right here at home that that will go to bed hungry tonight.  My detractors will claim that we make enough food and it a problem of distribution.  In retort, I say first use our resources to fix the problems of distribution, then worry about how we can burn food in our cars.  I do believe that renewable fuels do have a place in our future, (Biomass, Miscanthus, etc.) I just don’t think that we should be building an entire policy around an inefficient process like corn ethanol.

I promise I won’t rant next time but once and awhile it feels nice