The political momentum behind ethanol seems to be picking up steam, but that momentum has also given critics of the ethanol subsidies a voice, as well. As of late, the corn industry has become much more vocal in its defense of ethanol subsidies as the criticism from consumer groups, environmentalists, and free-market, pro-capitalist conservative groups has grown.
At first blush, this response is quite understandable. It must be frustrating to be painted as responsible for escalating food prices, when other factors, such as transportation, are bigger culprits.
It's almost impossible for outsiders to grasp what a shot in the arm the ethanol boom has been to the farming industry. With few fortunes having been made in the past by raising corn in a heavily governmental-influenced, capital-intensive, commodity business, it must be frustrating to grain farmers to hear people complain about the first real homerun in quite some time.
The urge to strike back when someone is raining on your parade is logical, especially when the windfall is the result of government policy, and thus controlled by public opinion. One could argue that's what makes the corn industry's response all the more critical; after all, as the government giveth, it can also taketh away. It's indeed a unique situation for farmers when public opinion means more to profitability than rain.
The grain industry's dilemma is determining what the proper response should be. With a lot more practice than agriculture at defending obscene profits, perhaps the oil companies offer a lesson. They largely grin and bear it, defending the profits as the market's way of eventually leading to lower prices.
The corn industry's response also has to be tempered by the fact that the largesse is coming directly out of the pockets of its biggest customer. According to the latest estimates, 5.8 billion bu. of corn will be fed to livestock, while 3.3 billion bu. of corn will be used by the ethanol industry. Meanwhile, livestock producers are paying the same price as ethanol blenders, without the $1.50/bu. subsidy.
Perhaps, when it's the government deciding the winners and losers instead of the marketplace, the only thing to do is shrug and smile, if you happen to be on the winning side.