How an Ethanol Subsidy Stands in the Way of Organic Milk

Ethanol is turning into a parable of farming economics, alternative energy and unintended consequences.

Act I: Congress sets out to improve the nation's "energy independence" (and satisfy politically powerful corn growers) by boosting subsidies for ethanol.

Act II: Farmers plant more corn that at any time in decades, selling more for fuel than for food or feed, and making a handy profit as a bushel of corn sores to record prices.

Act III: Food prices rise in ways that surprise many consumers, who learn that corn, corn syrup or some other corn derivative is in just about everything. Meat and dairy products cost more because it costs more to feed livestock. Folks start to wonder about the wisdom of investing in all that ethanol, particularly as studies question the energy and environmental costs and benefits.

Act IV: The high price of milk, driven by the high price of corn, driven by the subsidies for ethanol, leads some dairies to put off going organic, according to a story in today's USA Today. Selling organic milk at a premium isn't likely to win many customers, when they're already feeling pinched in their grocer's refrigerator.

Act V, of course, has yet to be written. Even as many are questioning the wisdom of pushing ethanol so aggressively, the presidential candidates are all campaigning in Iowa. And some see corn ethanol as a place holder for cellulosic ethanol, which can be made with a variety of other non-food crops. At the same time, the critics of the fuel are growing more vocal, and their arguments may be more convincing as people get used to paying a few extra pennies every time they buy a gallon of milk.

Whatever happens, this is likely to be one of many episodes describing the fits, starts, shifts and stutters that the American economy experiences on its way toward a clean energy future.

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