Another 1st for Obama & the U.S.

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A Drought Of U.S. Leadership

Posted 07/25/2012 06:31 PM ET

Leadership: As drought destroys the U.S. corn crop and drives prices skyward, the U.S. now buys corn from Brazil and faces the end of its prized role as the world's top food supplier. It's time to scrap the ethanol mandate.

There's a whiff of foreboding about an already-economically enfeebled U.S. now losing its crown as the nation whose corn harvest could feed the world.

The worst drought since 1956 has hit 88% of the U.S. corn crop and is driving corn prices sharply higher.

For the first time, U.S. agricultural companies are importing corn from Brazil — the equivalent of Saudi Arabia importing oil, as the Financial Times noted.

The Mayan calendar forecasts apocalypse in 2012. By creepy coincidence, the mighty Mayan empire itself fell due to a corn drought. But the drought affecting the U.S. is entirely due to market dynamics.

Droughts happen all the time. Under normal market conditions, crops from elsewhere pick up the slack.

There's nothing wrong with importing from Brazil, but it's a strange dynamic because our country is so big and has so much in reserve it shouldn't have to import.

The problem here is the man-made element that is exacerbating the U.S. drought. There should be plenty of corn from U.S. reserves after recent record harvests for exports — 61 million metric tons in 2008 — were it not for the 2007 law that forces U.S. corn producers to turn ever greater percentages of U.S. corn into ethanol.

"As biofuel production develops and expands, it will continue to put pressure on U.S. corn and other feed grain production, exports, livestock feeding, and other domestic uses," the Agriculture Department says.

Today, 40% of our corn is consumed by ethanol making — the filling of gas tanks instead of stomachs. And another 20% is being destroyed by drought this year.

The ethanol mandate comes under the dubious belief that ethanol is somehow "greener" — an idea easily discredited by the fact that it takes more energy to produce ethanol than that fuel supposedly saves.

The real problem is that it takes corn off the market, leaving the poor around the world hungrier because they can't afford U.S. corn, and reduces the U.S. role as No. 1 supplier with 60% of world corn exports.

Already, wealthier countries such as Japan, Korea and Taiwan are looking elsewhere for new suppliers because of skyrocketing prices and tight supply. America exports 50 million tons of corn — 15% of its crop — and Japan is America's top buyer, importing 14 million tons, followed by Mexico, Korea, Egypt and Taiwan.

Now, they all will have no choice but to turn to other corn producers such as Brazil, South Africa, China and Argentina to get their corn.

It's happened before. In the 1970s, then-Secretary of State Henry Kissinger, with prices rising in the U.S., cut Japanese access to U.S. soy. Furious, Japan financed Brazil's push into soybeans, and now that country competes with American farmers.

Today, the U.S. seems oblivious to the importance of exports. Instead, the ethanol mandate is its priority.

When will this government stop trying to pick winners and losers? Sadly, with this ethanol mandate, the U.S. has become the biggest loser of all.

http://news.investors.com/article/619723/201207251831/a-drought-of-us-leadership.htm

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