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Ethanol and the Presidential Election

The farmer and the cowman won't be friends.

12:00 AM, Sep 26, 2008 • By DAVE JUDAY
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Jay Cost of the "HorseRaceBlog" on delved into an area where few mainstream political commentators tread--farm state politics. His post was entitled: " Does McCain Have a Rural Problem? "

Earlier in the campaign, somewhat famously, Barrack Obama commented about embittered rural citizens "clinging to religion and guns." That comment is his rural problem. And he has it in West Virginia, Virginia, Kentucky, and parts of Pennsylvania. McCain's problem, as posited insightfully by Cost who has a real grasp on the economies and politics of these corn-belt states, is Indiana, Iowa, and Nebraska. And it all comes down to this: ethanol. Cost wrote, in part:

What tipped me off to the possibility is McCain's poll position in Indiana. McCain retains a lead in the RCP average, but it is much less than what George W. Bush pulled in 2004. Indiana is a major producer of ethanol - number 5 in the nation, capable of producing 1.2 billion gallons of ethanol per year. Indiana also ranks number 5 in corn production, generating 760 million bushels per year. Corn producers love ethanol because it's another use for their crop, which means corn prices go up. Could this be why McCain is doing poorly relative to George W. Bush's performance in 2004? It might be. Granted, only a small slice of Indiana's workforce is classified as agricultural. Like western Ohio, Indiana's workers are much more focused on manufacturing and tech than agriculture - despite the vast acres dedicated to farming. However, corn production is still a crucial aspect of the state's economy - especially in the productive farmland along Interstate 65 between Indianapolis and...Chicago! I'd note that McCain is also doing poorly in Iowa, number one with a bullet in both corn and ethanol production. He's also had problems in Minnesota, number four in ethanol and corn.

Cost went on to discuss Nebraska where McCain is getting pummeled on ethanol, chiefly by surrogate Obama spokesman Sen. Ben Nelson. Indeed, Cost points out that McCain only has to win one more vote in Indiana and Nebraska--not run away with it via a 20 percent-or-larger-margin as Bush did in 2004. Cost concludes: "I don't know if the McCain campaign needs to engage Obama in Indiana. Nevertheless, it is fair to suggest that it consider tightening its message to farmers. A quick Google search betrays McCain's soft underbelly on this front."

Nebraska is an interesting case--as pointed out recently by former agriculture secretary and now Nebraska Senate candidate Mike Johanns, the winner of the presidential race in the state gets 2 of the 5 electoral votes. The other three are awarded on the basis of the winner in each of the three congressional districts. That is why the Obama campaign has 15 people on the ground in the Omaha field office--despite the fact that all 5 of the Cornhusker State's electoral votes have gone to a Republican candidate in every election since 1964. If Obama can win one district in Nebraska, it could give him one electoral vote, and if the race is that close it could matter.

Ethanol is not a new issue for McCain--you think by now he'd have a strategy. After all, it is plausible to argue that he was not elected president in 2000 because of ethanol--long before it was such a prominent national issue. He skipped the Iowa caucuses back then because of his stances on ethanol, and despite some catching up in other states (famously Michigan) he never got over the slow start.

So how would McCain tighten his message? To begin with he could engage in Nebraska and begin to counterpunch. Since 2000, ethanol has matured as an issue. It is now an issue with two sides within agriculture. Livestock producers are paying the price of higher valued corn; and when (or if) cellulosic ethanol ever comes on line, alfalfa hay and pasture land will become more scarce and costly.

McCain's position on ethanol, i.e. letting the market take over, eliminating the mandate and tax credits for using the stuff, is not that different than the position of the Nebraska Cattlemen's Association, which is this:

because the availability of affordable, high quality feedstuffs is crucial to the profitability of the beef industry; and because the beef industry is competing with the ethanol industry for corn, that Nebraska Cattlemen supports a transition to a market based approach for the usage and production of ethanol.