Archer Daniels Midland (ADM) and the Criminal Insanity of Ethanol Subsidies

Archer Daniels Midland (ADM) and the Criminal Insanity of Ethanol Subsidies

According to the Center for Science in the Public Interest (CSPI), “Subsidies to companies that blend corn ethanol into gasoline, coupled with a mandate to market billions of gallons of that gasoline annually, cost taxpayers $6 billion a year.  Using corn for fuel leads to higher prices for corn and foods with corn ingredients – all for a program without significant environmental benefit.”

http://www.cspinet.org/new/201110131.html

But according to Straight Dope columnist Cecil Adams, the CSPI was incorrect in saying ethanol is “without significant environmental benefit” because it actually offers no environmental benefit at all:  “The capper … is the claim that it takes more energy to make a gallon of ethanol than you get by burning it.  One of the most vocal proponents of this view is Cornell University ecology professor David Pimentel.  In an analysis published in 2001 in the peer-reviewed Encyclopedia of Physical Sciences and Technology, Pimentel argued that when you add up all the energy costs – the fuel for farm tractors, the natural gas used to distill corn sugars into alcohol, and so on – making a gallon of ethanol takes 70 percent more energy than the finished product contains.  And because that production energy comes mostly from fossil fuels, gasohol isn’t just wasting money but hastening the depletion of nonrenewable resources.”

http://tinyurl.com/3oj92mw

And according to Energy Tribune writer Robert Bryce, the actual cost for taxpayers to subsidize ethanol is almost triple the CPSI’s $6 billion figure:  “Last year, the Congressional Budget Office reported that the cost to taxpayers of using corn ethanol to reduce gasoline consumption by one gallon is $1.78.  This year, the corn ethanol sector will produce about 13.8 billion gallons of ethanol, the energy equivalent of about 9.1 billion gallons of gasoline.  Using the CBO’s numbers, the total cost to taxpayers this year for the ethanol boondoggle will be about $16.2 billion.  In short, ethanol subsidies are nearly four times as great as those provided for oil and gas, even though the domestic drilling sector provides about 36 times as much energy to the U.S. economy.”  (As if oil companies should be taxpayer-subsidized either!)

http://tinyurl.com/42gag37

So who are you and I – American taxpayers – annually gifting (what “subsidizing” really means) this $16 billion ethanol corndoggle to?  The biggest beneficiaries are of course the major corn ethanol producers like Archer Daniels Midland (ADM), who along with Monsanto and other Big Ag (Big Corn) cronies contributed heavily over the past several years to many members of this bipartisan group of 15 U.S. senators who last November signed a letter demanding an extension of these economically and ecologically unjustifiable government giveaways:

Sen. Kent Conrad (D-N.D.)
Sen. Chuck Grassley (R-Iowa)
Sen. Christopher ‘Kit’ Bond (R-Mo.)
Sen. Tom Harkin (D-Iowa)
Sen. Amy Klobuchar (D-Minn.)
Sen. Ben Nelson (D-Neb.)
Sen. Sam Brownback (R-Kan.)
Sen. John Thune (R-S.D.)
Sen. Tim Johnson (D-S.D.)
Sen. Byron Dorgan (D-N.D.)
Sen. Mike Johanns (R-Neb.)
Sen. Al Franken (D-Minn.)
Sen. Debbie Stabenow (D-Mich.)
Sen. Mark Kirk (R-Ill.)
Sen. Claire McCaskill (D-Mo.)

http://tinyurl.com/24j33fy

ADM’s share of the corndoggle take is substantial, and it’s only part of the corporate welfare ADM’s been been receiving from Uncle Sam – you and me – for many years.  According to a 1995 article by James Bovard of the Cato Institute, “At least 43 percent of ADM’s annual profits are from products heavily subsidized or protected by the American government.  Moreover, every $1 of profits earned by ADM’s corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30.”

http://www.cato.org/pubs/pas/pa-241.html

In an outstanding article entitled “Starvation, Obesity, and Corporate Welfare: Archer Daniels Midland and U.S. Policy”, Charles Krakoff of EmergingMarketsOutlook.com gives us the rest of the story:

“ADM has exerted a strong influence on U.S. agricultural policy for at least 40 years.  In 1973 Earl Butz, President Nixon’s Agriculture Secretary, engineered a shift away from the New Deal policies of farm price supports, which included limiting production of corn and other major commodities, to encouraging farmers to produce as much as they could, regardless of price.  The government henceforth would pay direct subsidies to farmers to make up the difference between the market price and what it considered an appropriate floor price … providing a windfall to major corn processors…  Except it wasn’t precisely a windfall, since ADM had done a great deal to engineer this outcome.  During the Watergate investigation, Special Prosecutor Archibald Cox indicted then-ADM CEO Dwayne Andreas for giving $100,000 in illegal contributions to Hubert Humphrey’s 1968 Presidential campaign.  But Andreas was nothing if not bipartisan.  Richard Nixon’s secretary Rose Mary Woods testified that during Nixon’s 1972 campaign Andreas handed her an envelope containing $100,000 in $100 bills.  Between 1975 and 1977 Andreas gave $72,000 in ADM stock to the children of David Gartner, senator Humphrey’s chief of staff at the time, whom President Jimmy Carter in 1977 named to head the Commodity Futures Trading Commission (he was later forced to resign when the details of the ADM gift came to light)…”

“ADM continues to lavish huge sums on candidates for high office.  During the 1996 Presidential campaign ADM gave $100,000 to Bob Dole’s Better America Foundation, provided numerous free rides on ADM’s corporate jets to Senator and Mrs. Dole, and gave over $1.5m in soft money to the Republican National Committee.  Though Bob Dole lost his Presidential race he remained highly influential as a Senator and helped arrange the 54-cent per gallon ethanol tax credit of which ADM, producer of more than 60% of America’s corn-based ethanol, is the main beneficiary.  ADM also contributed to Clinton’s and George W. Bush’s campaigns.  Although Barack Obama apparently has received no direct campaign contributions from ADM – ADM was, however, a major sponsor of the 2008 Democratic National Convention – as a Senator from ADM’s home state of Illinois Mr. Obama was one of several farm-state Senators who staunchly opposed a Bush Administration proposal to lower the prohibitively high import duties on Brazilian ethanol made from sugar cane.  During his Presidential campaign Mr. Obama vigorously defended the corn ethanol subsidy, and as President he has kept the policy firmly in place…”

“If rigging U.S. agriculture, trade, and energy policies to its advantage weren’t enough, ADM has also conspired with other agro-processing giants such as Cargill and Ajinomoto to fix prices for lysine, citric acid, and corn syrup.  It paid a $100m fine in 1996 for lysine price-fixing in a plea bargain that led to two-year prison sentences and $350,000 fines for Michael Andreas, Dwayne’s son and heir apparent, and Terence Watson, another ADM executive.  At around the same time, ADM, Cargill, and the British sugar company Tate & Lyle were indicted by the U.S. government for conspiring to fix the price of high-fructose corn syrup.  Though they were cleared of criminal charges in 1999, they subsequently settled a lawsuit brought by U.S. food and beverage manufacturers, Cargill paying $24m, Tate & Lyle $100m, and ADM $400m…”

“The funneling of taxpayer dollars into ADM’s bottom line continues unabated…  Then there is the effect of ethanol subsidies on world hunger.  You may remember the commodities price boom in the first half of 2008, before the housing market crash, when the oil price hit $147 a barrel, the corn price went to $7.65 a bushel, and more than 30 countries, including Bangladesh, Cameroon, Egypt, Haiti, India, Indonesia, Mozambique, and Senegal, suffered widespread and deadly food riots.  The spike in the corn price was caused largely by the diversion of roughly a third of America’s corn crop to ethanol production.  This had a knock-on effect on wheat and rice prices.  Numerous grain exporting countries, including Argentina, India, Vietnam, and Russia, imposed export bans, which contributed to shortages and price rises in countries dependent on food imports.  The same phenomenon may be about to repeat itself…”

“You can’t blame ADM for hot weather in Russia.  But if you had to identify one principal cause of what seem to be recurring food shortages and price shocks, you’d have to look at U.S. agricultural policy, and if you look at U.S. agricultural policy you have to look at ADM.  Ethanol subsidies and tariff protection divert cropland from food production to energy production.  It’s as if you cut down a corn field to put in a power plant, except a power plant has a much smaller footprint than the thousands of acres of corn fields needed to produce an equivalent amount of energy.  The competition for cropland intensifies, food prices shoot up, and the world becomes much less stable.  Starvation abroad and obesity at home, ADM is one corporation with a lot to answer for.”

http://tinyurl.com/3nyh2cl

Related Image:

http://philebersole.files.wordpress.com/2011/06/big-corn2.gif

Related Video:

http://www.youtube.com/watch?v=n4p0072GwjM

 

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