Is it nutty to feed peanuts, French fries, Kit-Kat bars, Ramen noodles, and trail mix to pigs? Apparently not. You don’t have to raise hogs to understand that hog farmers, faced with ever more expensive feed corn, are turning to cast-offs from human snack and junk food producers to feed their livestock.
Increased demand from biofuels—ethanol from corn specifically—production is making corn significantly more scarce and driving up price. To help control costs, farmers are doing what we all do in the face of higher prices—find cheaper substitute goods to use instead. And according to reports from animal nutritionists, a moderate amount of the fatty, sweet junk food stuff is OK, or maybe even beneficial to the animals.
The pigs, it’s reported, don’t mind. That’s a good thing, since the per-bushel price of corn in the U.S. is nearly double that of a few years ago, and up by 13 percent over last year, according to the National Cattlemen’s Beef Association, the National Chicken Council, and NC hog farmers and livestock nutritionists. Ethanol production continues to displace food production in the U.S., at least while the technology continues to receive taxpayer-financed government subsidies as a favored industrial policy.
In places like China, where pork consumption is a staple in the everyday person’s diet, the effect of higher corn prices is also being felt, and is more critical. The Chinese are literally trading off the ability to feed themselves for continuing subsidies to ethanol energy production. Despite a bumper crop of corn harvested last year, corn prices in the Chinese commodities exchange have been about 30 percent higher than just a year ago.
In the midst of their domestic ethanol policy, the Chinese government must remain mindful of a modern day famine that led to the deaths of somewhere between 14 and 40 million people —consensus estimates are in the low 30 millions—by starvation, and causes related to the Chinese famine, between 1958 and 1961. Cause of the mass starvation? The Maoist ideological policies that forced farmers to abandon private farming, the source of 80 percent of the country’s food supply, in favor of agricultural communes and government-decreed industrial policy.
Today, to combat the unintended consequences of a government push to supply fifteen percent of China’s energy needs with ethanol, Chinese authorities are considering new policies to try to moderate pork prices, which rose almost 30 percent in May, 2007. The new measures include possibilities for pork production subsidies, or releasing some of China’s national pork ‘reserves.’ Current ethanol policy has left Chinese consumers paying more for each mouthful of food, and reducing their consumption of key pork products besides.
Americans are not experiencing a catastrophic decline in the availability of foodstuffs, but we are paying more for each mouthful of food we eat, in part due to the increased scarcity of corn. Domestic ethanol policy puts upward pressure on the prices U.S. consumers pay for meat, milk, and other products derived from corn-fed livestock. And what about those of us who dote on Kix, Trix, Corn Flakes, Corn Pops, Frosted Flakes, grits, corn muffins, and vast numbers of other edible and non-edible products in which corn, corn starch, corn syrup, plant fibers and derivative products are significant ingredients? Given policy initiatives that aim to generate a significant percentage of domestic power with corn and other biofuels, filling up at breakfast may involve something other than your favorite cereal or muffin—unless you’re at a gas pump, that is.
Thus U.S. farmers have substituted snack market ‘seconds’ for corn as an affordable source of feed. In an earlier Free Market Minute I discussed the ethanol policy situation, and this spillover into hog production and other markets is another predictable consequence.
Does this mean that ethanol produced from corn is a bad idea? Not necessarily, but as a policy, it deliberately aims to circumvent signals from the market about what consumers themselves regard as their highest priorities. At worst, centrally-planned industrial production has tragic results, the more so as it becomes more comprehensive. At mildest, market patterns of industrial and agricultural production are distorted to conform to political ends, with an inevitable erosion of rights and freedoms. Why is this trade-off necessary?
It’s not.
If the route to sound U.S. energy investment is to take us through cornfields, I cast my vote for decisionmaking from Wall St. rather than Pennsylvania Avenue or the U.S. Congress. The reason? The market route is far more likely to preserve my freedoms along the way.