$4 Corn

This ARTICLE on the current rise in the price of Corn (to $4/bushel), which I stumbled upon in my local coffee shop, is well worth the read. I found it particularly interesting as it brings together many of my interests - the environment, agriculture, farming, domestic food production, alternative energies, government subsidies, food security/safety, and the corporate intersection of all of this.

For a tease of the article:
Four-dollar corn. The price probably doesn't mean much to many Fortune readers, certainly not the city slickers who wouldn't know a combine from a planter. But in farm country, $4 corn is more than a big deal. It's a phenomenon. "It's the center of conversation in the center of the country," says Elizabeth Hund, head of agricultural lending for U.S. Bancorp.

In the span of just eight months, the price of the U.S.'s most important crop - our biggest agricultural export as well as the staple feed for our livestock - has doubled from $2, about where it had been stuck since the late 1990s, to $4 a bushel. The cause is soaring demand from ethanol plants, which bought 2.2 billion bushels last year, 34% more than in 2005. Previous price spikes were short-lived and usually caused by drought, but the futures market thinks this rally has legs.

May 2008 corn recently traded at $4.20 a bushel, while December 2010 futures were at $3.74. This means farmers can lock in terrific prices not just for the 2007 crop but for the three after that as well.

Problem is, what's good for farmers - and even better for the companies selling them tractors, seeds, and fertilizer - has started to roil other parts of the economy. The feed costs of cattlemen and hog farmers have skyrocketed. Ethanol producers have seen their profits slashed. Food companies are being squeezed and are starting to pass along higher costs to consumers. (This isn't just a U.S. problem: Mexico is in an uproar over soaring tortilla costs.)

I know people have been quick to point out that this is the hidden evil of alternative fuels, but I don't see it quite that way. This goes to the whole Free Market argument ... when the true cost of farming is realized, the cost of subsidized livestock feed and exported crops will be balanced out my local economies demanding the most efficient use for the resource. Read on to realize just how complicated this issue may become.

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