Daniel Englander
Our Long, Tortured, Corn-Based History May 20, 2008 at 11:20 AM
In 40,000 years, after the last of the Himalayas have disappeared under the Indian Ocean, and future generations with webbed feet and gills rule the world from their outposts on rusted-out oil platforms, the memory of corn will have long been forgotten. Perhaps it will survive as a chapter in some elementary school history book - “The Cult of Corn,” or possibly “Corn: God of the Ancients” - though it’s doubtful anyone will understand our close, personal relationship with the cereal grain. I certainly don’t.
What’s interesting about our addiction to corn are the steps government bodies have taken to maintain corn prices at artificially low levels. And there are several examples. The Corn Laws, enacted in Britain in the 1840s, sought to keep grain prices at extremely low levels to protect British farmers from cheaper imports. The tariffs resulted in both the collapse of British agriculture and the founding of The Economist. Tariffs on the import of refined sugar were aimed at protecting a burgeoning sector of the U.S. corn production industry - high fructose corn syrup, a form of sugar made from corn. This tariff, while crippling agriculture production in developing countries, has succeeded primarily in making Americans fat. With the average American now consuming roughly 42 pounds of high-fructose corn syrup annually, and with per capita production up 4,000 percent since 1973, the average American now consumes an additional 75,281 calories per year.
But in the future this shouldn’t be a problem, because the Renewable Fuels Mandate has succeeded primarily in raising food prices and cutting down on the amount of corn moving in to direct and indirect food consumption. The new corn tariff, which is what the RFM is, has raised prices for animal feed and, therefore, animal products sold in super markets, resulting in a short to medium term 10 percent increase in food prices. The long term effects of this may be even more drastic.
Other advances are possible. There’s an open debate now about what else the government can do to keep corn prices artificially low while attempting to solve some ongoing macroeconomic problems. One solution is to “Make mortgages out of corn. Turn what is plentiful into what is scarce.” The credit crunch roiling international markets can easily be solved by transforming corn into mortgages, which “can be ‘offset’ by employing other corn products as corbon-offset and corn price deflators.” In other words, with the right mix of wrong-headed government subsidies and continued reliance on an agricultural commodity that has no business outside of Oaxaca, we can make the banks start trusting each other again. Basing the overnight Fed rate on corn production would spur an increase in lending, while decreasing the amount of production devoted to making Americans fat.
Ultimately, we believe, along with Long or Short Capital, the optimal strategy is to go “long corn, long real estate and long any problem which can be solved by corn, which as far as we can determine is EVERY problem.” Because anything else but a corn-based economy would be untrue to the primary goal - making farmers rich.
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