Food & Fuel Prices | NRO
The Post article asserts that corn prices have “been climbing for months on the back of booming government-subsidized ethanol programs.” This has quickly become the conventional wisdom. But while free market types (like me) are skeptical about both subsidies and tariffs, there is actually no evidence that these market manipulations have been a major factor behind rising prices for corn or other grains. Researchers Robert Zubrin and Gal Luft point out that the total U.S. corn crop has increased 45 percent since 2002. The amount of corn available for food and feed has increased 34 percent —- after the part used for ethanol has been taken out.
But haven’t those farmers cut back on other crops — soy and wheat, for example — to plant more corn and hasn’t that led to increases in the prices of those grains? Apparently not. As Zubrin and Luft also note, U.S. soy plantings this year are expected to be up 18 percent, wheat plantings 6 percent, and overall, U.S farm exports are up 23 percent.
American farmers are rational businessmen. When the prices crops command rise, they produce more — both by increasing acreage under cultivation (only about 30 percent of U.S. farmland is currently cultivated), and by cultivating more intensively — producing more bushels per acre. That requires more investments, but it brings more return on those investments.
Clifford D. May on Food & Fuel Prices on National Review Online