Those Who Don't Learn From History... Using Grain To Make Alcohol

Yes, it would seem that we are doomed to repeat a dark moment in our agricultural history. This is not the first time that America has faced a food price crisis because corn was diverted from the food supply to make alcohol. In the early 1900's, grocery prices began to rise in large part because massive amounts of corn were being sold to brewers and distillers. By 1912, over half of all corn grown in the United States was used to make beer and liquor.

Last night, while I was doing some research, I stumbled upon this great little clipping from the June 5, 1912 New York TImes that covers many of the central issues of the day. Essentially, in 1892 Standard Oil had bought the rights to a patented process of converting corn starch to sugar -- ostensibly to produce fuel alcohol. Since Standard had plenty of cheap oil at the time, fuel alcohol was viewed as a competitor to their core oil and kerosene businesses. However, Rockefeller was smart enough to realize that getting into the booze business would make them a pile of money while hedging their bets in energy. It also put them in a position to lean on other fuel alcohol producers since they could now flood the market with its surplus and force competitors out of business practically at will.

So they became the kings of corn-based malt (since malted sugar had historically made from barley, it was often called "barley malt" even if derived from corn or other grains). With feverish demand for corn and skyrocketing corn prices, farmers quickly switched to corn from other grains (sound familiar?). Standard Oil built a network of malting facilities wherever corn was grown. Voila! the demand for alcohol created radical distortions in the food supply. So extreme were the manipulations of commodity grain prices by the dawning of the 20th century, that these tactics were cited as justification (among many) for the Sherman Anti-Trust Act that lead to the break-up of Standard Oil in 1911.

Combined with a couple of droughts and the pressures of the First World War, worsening shortages of corn and other grains (particularly wheat) became an ingredient in the debate over prohibition. It is rarely recognized that this intense temperance debate was far more complex than simply bible thumping fundamentalists and angry wives waving signs around.

In spite of the fact that America had a far better grain supply than most of Europe, grain prices were an important national concern and played an important role in politics. From an agricultural policy point of view, the industrial states (which tended to be more liberal on the moral issues) were very concerned about the impact distillers had on food prices. In the great "bread basket" states (which profited most from high grain prices) there were very strong "dry" movements driven by well-organized and pious Protestant churches that trumped the financial issues. Both sides used "food vs booze", "farmer vs city folk" arguments to help make their cases. Take your pick -- economic or moral -- the Temperance Movement had the wind of a perfect storm at its back.

It seems to me that there are three important lessons to take away from this.

First, we cannot allow the choice to be food vs fuel. Food must always come first if we want to eat. Agricultural policy must realign itself with the fundamental social importance of food. Even more importantly, it must affirm the connection between agriculture, social culture, and environmental stability. Current policy is measured purely by dollars going back into the "agricultural economy" formulated through a complex calculus of the political benefits of various agricultural commodities. The structure of these policies treats agriculture as if it were some monolithic, trade-protected, manufacturing industry. The fact that even the current energy bill singles out corn as the de-facto source for ethanol as an alternative fuel is the quintessential example of how disconnected national policy is from real need or vision.

Secondly, it is possible to have a "food and fuel" agricultural policy. Biofuels can be made from all kinds of things normally considered agricultural or forestry waste. Corn stalks, straw, whey, slaughter house offal, sawdust, manure .... and the list goes on and on. Ethanol alone can be made from myriad feedstock materials. Agricultural policy should focus on creating new valued added energy products from agricultural waste. Focusing on waste can make agriculture more profitable, provide new sources of energy, reduce environmental problems created by agricultural waste, and bolster the food supply in one fell swoop (of course, this is starting to happen, but not nearly fast or broadly enough!)

And third, standardizing on any single source for energy, be it oil or corn, is dangerous. As soon as a feedstock for energy production become a broadly traded commodity, it becomes ripe for manipulation through global market forces and governments -- if these are agricultural products, external market forces have a direct impact on the stability of agriculture. The flip side of the Standard Oil/corn story is that prohibition led to the collapse of grain prices in spite of an increase in fuel alcohol production (raising profits for the distillers and bankrupting farmers).

In the science of ecology, there is a postulate that diversity leads to stability -- that maturing ecosystems seek their own level of sustainable diversity based on available resources and energy. Humans are not immune from this tendency and should actually use this principle for guidance. If energy policy were tied to agricultural policy in a way that identified regional opportunities to turn agricultural waste into a multitude of energy products in a mosaic created by farmers improving their farms, the benefits would be enormous and long lasting. It seems to me that making every farm in America a net exporter of both food and energy should be a national goal of the highest priority.