Both Dave and I were struggling for breath as we hiked across Abra Huacahuasijasa, a 15,200 ft mountain pass overlooking the Sacred Valley of the Incas. We were an unlikely pair — a farmer from western Illinois and a techie from Washington state. The two of us met a few days earlier when we both joined a hiking adventure in Peru. And here we were, experiencing Peru, and sharing details of our lives as we hiked through this magnificent landscape.
Over dinner I learned that his parents had bought their family farm in the 1960’s. The farm they purchased had been 100 acres of mixed use farm land, with both crops and livestock. In the intervening decades Dave and his brother had taken their parents little farm and expanded it to 10,000 acres. Both Dave and his brother were college educated, one with a degree in agricultural science and the other in finance. They had used their educations to expand the family farm into a substantial business.
Today, that farm produces mostly corn and most of the corn they produce is converted into ethanol. The two brothers had doubled down on corn during the ethanol boom of the early 2000’s. They bought up neighboring farms as they became available, invested in equipment to modernize the operation, and used sophisticated trading strategies on futures markets to ensure a steady stream of income, even during poor producing seasons.
Corn is the largest feed grain crop in the United States today. Close to 40% is used for ethanol production, primarily as a fuel additive.
We know that the move to electric vehicles will impact the oil industry. But how many of us are also aware of the potential impact on the farming sector? In the United States, the ethanol industry generates nearly $30B annually in revenues, and supports almost 70,000 jobs across rural America.
Let’s turn to history to understand the potential impact.
At the turn of the 20th century, historians estimate that there were 8.5 million horses in America — one horse for every 5 people. A substantial amount of American agricultural output was devoted to feeding these mainstays of “modern transportation”.
The post WW1 agricultural boom had encouraged farmers to expand to feed foreign markets as Europe rebuilt after the war. However, the bottom fell out of that market in the 1920s just as the rise of the automobile crushed local feed markets. American farmers were wiped out by the perfect storm of the transition to the automobile, the retirement of the horse, and the drought of the 1930s that became known as the Great Depression.
Over the next two decades, the demand for corn is likely to see a steep decline. Extreme weather due to global warming may also impact agriculture, just as it did during the 1930s.
We may not experience anything like the Great Depression. However, as we move to electrify everything, which we must, let’s also plan for the inevitable impacts it will bring.