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Corn-On-Corn

South Dakota strikes it rich with ethanol

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Farmers here call it corn-on-corn. It describes a crop-rotation strategy that capitalizes on the soaring corn prices caused by ethanol. One year they plant corn, and the next year they plant it again.

Whatever happened to letting the land lay fallow? Isn't corn harder on topsoil than any other crop? Well, have you checked crop prices lately? Corn just topped $8 a bushel. Last summer, a bushel fetched $3.50, and farmers were finally earning a profit. Historically, $3 corn was considered a big deal. Of course, production costs are up considerably, so three bucks isn't the gold standard it was.

Thanks largely to ethanol and high crop prices—soybeans and wheat are way up, too—my hometown is witnessing its most significant economic growth in many decades. Aberdeen, S.D., where I live, is the county seat of Brown County, the most important agricultural county in South Dakota. That's saying a lot, because South Dakota might be the most farm-dependent state in the union. Annual economic activity in the state is roughly $32 billion. Agriculture, contributes about $18 billion to that.

Brown County lies in the flat, fertile James River valley, where corn, wheat and soybeans mantle the land. Of the 1.1 million acres of land in Brown County, 900,000 acres are planted to crops.

When Hillary Clinton visited here recently, she spoke to an excited crowd of 600 from the porch of a farm home that serves as headquarters for an impressive agricultural operation. Her hosts insisted they needed a safety net if they are to continue to feed the world. Few among the 600 people gathered doubted farmers deserve federal help, or that feeding the world is what they are doing.

Farmers understand that crop prices can quickly tumble to below production costs. Subsidies keep farmers on the land, providing stability to an industry characterized by uncertainty, mostly caused by weather. The subsidy programs are part of a complex system summarized as a "cheap food policy."

The trouble is: Food isn't what some corn farmers grow anymore.

Last year, the federal government paid $3 billion in subsidies to farmers. South Dakota, the recipient of $158 million, ranked 12th among all states in the amount of subsidies received, just ahead of California. Some $68 million of South Dakota's subsidies went to corn farmers. Brown County led all 66 of South Dakota's counties with subsidies worth $7.5 million—$2.9 million of that was delivered to 889 corn farmers in the county.

But it's not crop supports or conservation payments that are dramatically boosting farm incomes right now. It's subsidized ethanol. That's why there's a thriving economy in my obscure corner of the world. Sales of flexible-fuel trucks and SUVs are strong. The sprawling implement dealers fringing Aberdeen have orders for six-figure tractors backed up for two years. New houses are springing up everywhere, including mini-mansions in subdivisions like you'd see in Sioux Falls, S.D. Two ethanol plants are already operational, and a couple more are under construction. The ethanol industry has also boomed the rest of South Dakota. There are now 13 ethanol plants in the state, and 50 percent of the state's corn crop—a higher percentage than any other state—is converted to ethanol.

Despite weighty evidence against the appropriateness of corn ethanol, farmers and ethanol officials remain steadfastly supportive. A recent surge in protests against ethanol by consumer, environmental and other groups—even Time Magazine took a big swipe at corn ethanol—might be a tad late. The industry and its supporters have done precisely what they needed to do to help block or stall a reversal of favorable public policies.

Consider that there are 147 ethanol plants spread across the Midwest and the Plains, and that a costly infrastructure, including water and waste systems, rail spurs, roads and power generation and distribution systems, has been established to facilitate corn-based ethanol. It's impossible to say how much money, private and public, has been invested in the corn-ethanol enterprise, but it is undoubtedly so sizeable that the industry can use this as a rationale for permitting corn ethanol to continue.

My community now has a vested interest in both higher crop and oil prices. Of course, those two can have an unfriendly relationship. But who could have ever imagined that Aberdeen would have something in common with Saudi Arabia?

Peter Carrels is a contributor to Writers on the Range, a service of High Country News (hcn.org). He writes and reports in Aberdeen, S.D.