Will Farmers Go on an Ethanol Bender?

I remember in college that dorms and frats with a taste for spirited beverages would spike punch with pure ethanol, which was cheap and easily obtained in labs. In my freshman year a classmate who had lived a quiet life, drank an unbelievable quantity of the liquid at a party and then spending the next 24 hours with a mattress in a common bathroom so he wouldn't have too far to move to get to a toilet. He lived - luckily - and learned a lesson: when you over indulge in grain distillates, you can end up with a nasty hangover.

American farmers may be setting themselves, and the rest of us, up for a similar experience. Ethanol has become all the rage, and that has drive up the price of corn and increased the number of dollar signs in the eyes of growers. As the Financial Times noted last Friday:

US farmers plan to increase their corn-growing area by the largest amount seen over a 12-month period in more than 100 years, as they try to cash in on the rush for ethanol, the US Department of Agriculture said on Friday.

This means fewer soybean plants and less cotton production. Some have been arguing that the diversion of crops to fuel would have a negligible effect on the cost of feed for animals and, ultimately, the cost of food for humans.

But the impact of the switch will be more complex. As the FT noted:

Grain analysts said the reduction in soybean growing could lead to falling stockpiles, which could push up prices and result in livestock farmers paying more for animal feed made from soybeans.

Now consider that as more farmers seem to make more money, we will likely see some degree of a gold rush effect, particularly as oil prices again rise. Then there is that great principle shown by history: as everyone rushes in one direction, something bad is bound to happen. Let's hope that as the corn crop expands to create ever more grain alcohol, someone is considering how to build the world's largest aspirin for the morning after.