Grain prices are rapidly rising since demand is growing quicker than production. However, part of this increased demand comes from America’s new enthusiasm for corn-ethanol. Could the US elections change this trend and influence the current price increase? Before I even begin to address this question from a presidential candidate’s perspective, allow me to put forth a few numbers.

In December 2007, the USA was producing some 7.2 billion gallons of ethanol per year from its 134 plants, which absorbed about 20% of corn production. Meanwhile, there were 66 plants under construction or expanding to produce an extra additional 6.2 billion gallons1. Once these projects are completed, nearly 40% of all US corn production will be used to produce ethanol. Now remember, Americans as a whole consume some 140 billion gallons of fuel and 40 billion gallons of diesel each year.

Among the presidential candidates still in the race as I write this article are, in the Democratic corner, Hillary Clinton and Barack Obama, and in the Republican corner, John McCain. First, we’ve all noticed that agriculture is barely mentioned in most platforms set forth by the candidates. Discussions about agriculture have largely focused on ethanol and have basically ignored all other relevant issues. Which is rather surprising since the first primaries were held in Iowa, a farm state with a population of three million. But since Iowa produces a lot of corn and has some 28 ethanol plants with 19 under construction, it all tends to make more sense. In a race where perceptions may change reality, looking good from the get-go is important. Although each candidate was questioned on the issue of corn ethanol as part of the Iowa caucus framework, for the purposes of this article we’ll be looking at each of their positions in the long term.

About a year ago, a reporter asked Hillary Clinton about her readiness to oppose funding aimed at developing technology that would reduce America’s energy dependence but would not help fight climate change, her response was an unequivocal ‘yes’.

As you’ve probably guessed, Hillary is not a big fan of corn ethanol. She prefers ethanol fuel-cell, which has a much better energy and environmental outlook than corn ethanol. She plans to allocate 50 billion dollars for research into clean energy over a 10-year period. However, last November, Hillary declared her newfound allegiance to corn ethanol for a variety of reasons, notably because plants are now better represented throughout the American landscape, thus reducing shipping distances. She also lends her support to the highly ambitious Biofuel Security Act which aims to produce 60 billion gallons of ethanol per year (fuel-cell and/or corn ethanol) by the year 2030. Barack Obama, the senator for Illinois, which is also a corn producing state, is one of the masterminds behind the Biofuel Security Act. Basically, he supports the same ethanol targets as Mrs. Clinton, except that Mr. Obama has a clearer and more fervent position on corn ethanol than his fellow democrat.

As for John McCain, the Republican candidate, he stated in 2005 that corn ethanol would not help reduce fuel consumption, improve air quality and would have little impact on the United States’ energy dependence. However in 2006, he revised his position to say that corn ethanol was a vital source of alternative energy since it would reduce American dependence on foreign oil and decrease greenhouse gas effects. It’s important to note that McCain still maintains his opposition to ethanol funding.

As we can all see, although Clinton and McCain are not as ardent in their ideological support, based on what the candidates have said, corn ethanol still has some pretty good days ahead, regardless of who becomes president. Seems to me that only significant developments in fuel-cell technology could break corn ethanol’s current momentum and the ensuing repercussions on grain prices.

1. http://www.ethanolrfa.org/industry/locations/

Maurice Doyon is an Associate Professor and Graduate Program Chair, Department of Agricultural Economics and Consumer Science, Université Laval. He is also a member of the Centre de Recherche en Économie agroalimentaire (CRÉA) with that same department, auxiliary professor with the University of Maine, associate researcher with the Centre interuniversitaire de recherche en analyse des organisations in Montréal and associate researcher with the Neutraceuticals and Functional Foods Institute (NIAF). Furthermore, he holds a doctorate degree in Applied Economics from Cornell University, as well as a Master’s degree from this same institution. Mr. Doyon has received over fifteen grants and merits throughout his distinguished academic career.