Not too long ago, we took a look at the effect the drought is having on the nation’s farmers, particularly those producing corn. The situation isn’t improving, as is being widely reported, and the farmers are in dire straights. Prices are rising for not only corn for the dinner table, but all the other products which use corn in their manufacturing processes. So it would be rather silly to think about burning even more corn to make unprofitable ethanol, right?

Think again.

Despite raging concerns about the effect the worst drought of 50 years on the corn harvest, the former Bionol ethanol plant in Pennsylvania is back up and running after being purchased by Zeeland Farm Services (ZFS). Production began last month at the now named Pennsylvania Grain Processing LLC and is producing ethanol, dry distiller’s grains and other products.

Nearly all of the former employees of the plant were brought back and there are plans to hire additional employees. Cliff Meeuwsen said the plant is up and running at full capacity. ZFS also owns and operates corn and soybean processing plants in Nebraska and Michigan and is no stranger to operating agricultural businesses in times of challenges.

On the surface this probably sounds like madness in terms of a marketing plan, right? I mean, ethanol isn’t even profitable on the free market when corn is plentiful. With prices rising, you’d have to be crazy to reopen a plant at a time like this, wouldn’t you? Yes… crazy like a fox.

Global pressure on the United States to relax its ethanol quota mounted on Thursday as the top World Bank food official said an “immediate, temporary suspension” of the mandate could help head off another world food crisis.

As the surge in corn prices revives a fierce food versus fuel debate, José Graziano da Silva, the director-general of the UN’s Food and Agricultural Organization, wrote in the Financial Times newspaper that competition for a U.S. corn crop that has been decimated by drought was only going to intensify.

“Much of the reduced crop will be claimed by biofuel production in line with U.S. federal mandates, leaving even less for food and feed markets,” he wrote in an op-ed just a day before the U.S. government issues a pivotal crop report that is expected to show U.S. corn output falling to the smallest in six years and stockpiles at near record lows.

But hey! It brought back dozens of jobs in an election year! You can’t just turn around and shut it down just because people are running out of food. The fact is, Washington has created a false market for corn-based ethanol no matter how high the price goes. The taxpayer dollars will keep on flowing, so there will always be somebody there to vacuum them up.

We’re still burning our seed corn. Literally. But don’t expect to see an about face from the White House on this one with only a couple of months until the election.

Tags: energy ethanol