Let Them Eat Corn

Is biomass as “green” of a renewable as we’ve been led to believe?

And now, a brief history of agricultural subsidies, told through the buttered, salted, and parmesan-cheesed lens of our favorite movie snack, corn. 

The US has long been the world’s largest producer and net exporter of corn, at 15.1bn bushels of corn in 2021, the last year for which data is available. About 11% of the US corn yield is exported annually, 33% goes to feed livestock, and 38% is processed into other stuff, primarily ethanol and corn syrup. 

But here’s some more math: 

• The price of corn fluctuates between $5-6 per bushel, per Bloomberg, making corn a ~$60bn / year market in the US. 

• Federal & state governments issued over $9bn of subsidies, tax breaks, and grants targeted at corn production in 2020, per data collated from the US Dept of Agriculture, which is an approximately typical year since subsidies were raised in the early 1980s, adjusting for inflation. 

• The average commercial farm generated a profit margin of 11.3% annualized from 2010 to 2020, per the Perdue Center of Commercial Agriculture. 

The government is providing 15% ($9bn of subsidies / $60bn market) of the corn market, indicating that nearly all the profit, with just enough margin of error to ensure consistent profitability, comes from the government decreeing that it be so.

At this point, you are likely thinking a couple of things;

1. I didn’t come to Coral for an econ lesson, and 

2. Isn’t this article about biomass as a renewable energy source?

Fair, and yes. Stay with us a moment longer. 

Biomass as a Renewable Energy Source

Biomass refers to the practice of taking organically derived material (primarily corn and wood), processing it to remove useful byproducts like ethanol, and burning the rest in order to generate electricity. Its’ proponents, whose biographies and linkedin pages read remarkably like an Exxon Mobil alumni directory, claim that it is carbon-neutral on the theory that plants pull CO2 from the atmosphere, are themselves burned, and then new plants continue the virtuous cycle. 

However, biomass, as a renewable energy source, is honestly bullshit. It’s a series of subsidies, special interest groups, and political handwaves masquerading as an industry. It’s unprofitable on its own merits and bad for the planet. Consider the following:

• Farmers, when incentivized by guaranteed profits from massive government subsidies, are going to want to plant more of the thing which gets them said money. In this case, corn, which is largely processed into ethanol. The National Conservation Institute recommends that crops are rotated every two years to ensure soil health and land arability. If you don’t see the problem here…  

• In 2021, approximately 5% of US primary energy came from biomass at 4,835 TBtu. Of that, 2,084TBtu came from wood, 2,331TBtu from biofuels (such as ethanol), and the remaining from waste, per the EIA. Over 40% of biomass energy came from cutting down trees, the avoidance of which should be among the highest priorities for anyone who cares about carbon sequestration. 

• Just this week, UK-based Drax announced plans for two new biomass plants in the US, their profitability will largely be found through arcane carbon accounting procedures, and the extensive tax credits from the IRA. The same company has admitted publicly, albeit in fine print, to sourcing its raw material from Canadian old-growth forests, as recently as last year. 

• Even if one accepts that biomass processes are carbon neutral, which we do not, there’s still a lot of extra carbon sitting in the atmosphere for long periods of time before it gets pulled back down into plants. And the electricity still has to come from somewhere to process the plants; *whispers* “it’s nowhere near carbon neutral.”

We could continue, but will stop the ranting there. 

It’s worth noting that there are valid industrial applications of biomass. Coral believes mangroves, which grow remarkably quickly and sequester carbon into their soil, rather than wood, are worthy of exploration as a biomass fuel source. Excellent startups, such as Coral-favorite Macro Oceans, show promise in using kelp to replace corn in biomass processes, including sending much of the raw material into high-permanence uses such as textiles. 

We try to end Coral posts with actionable takeaways; 

If capital allocators, technologists, and innovators read this and land, as we do, somewhere between baffled and outraged as this nonsensical industry, what should they do about it? In this case, the answer is political rather than technological. 

Remember all those corn subsidies? The largest producer of corn, and thereby biomass feedstock and eventually ethanol, is the state of Iowa. In 2024, as in all presidential election years, Iowa will host caucuses, which represent the first and among the most significant events in the electoral cycle. We have often written that incentives create behavior. When the bellwether for the presidentially ambitious happens in corn country, corn is protected. The largest old-growth forests in the US are in Alaska, Arkansas and Oregon, whose caucuses are held later in the cycle. Let’s get the caucuses schedule changed. Call your Senators.   

If you enjoy this, check out our piece on hydropower: