Obama and Clinton tackle two primary states’ opposing economies

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Barack Obama and Hillary Clinton face pressure from both sides of the debate over biofuels and soaring food prices as they prepare for Tuesday’s Democratic primary elections in Indiana and North Carolina.

By Andrew Ward in Washington

Indiana is the fifth-largest corn producing state in the US, making it a leading beneficiary of rising crop prices and increased use of corn-based ethanol in fuel.

North Carolina imports more corn than any other state for its multi-billion dollar livestock industry, which is under intense strain from rising input costs.

Global corn prices have risen by 41 per cent over the past year and a third of that increase was caused by growing demand from ethanol producers, according to the White House.

Both Mr Obama and Mrs Clinton are committed to expansion in ethanol production – heavily subsidised by federal tax dollars – as part of their plans to tackle climate change and reduce dependence on foreign oil.

Their stances were aimed in part at voters in Iowa, the largest corn producing state, which held the crucial first presidential nominating contest in January.

But in the past week they have trodden a more careful line between the conflicting interests of Indiana and North Carolina farmers, while acknowledging concern among ordinary voters about rising food prices.

Indiana has more than a dozen ethanol plants open or under construction, with 381m gallons of fresh capacity planned on top of the 467m gallons it produces each year.

Poet, the world’s largest ethanol producer, told the Indianapolis Star recently that it was looking for up to six more facilities in Indiana over the next two years. Producers are attracted to Indiana in part because of its proximity to east coast population centres compared with other prairie states.

While Indiana cashes in on the ethanol boom, North Carolina is feeling squeezed. “It is reaching crisis point,” said Ron Heiniger, professor of crop science at North Carolina State University. “The livestock industry is the economic engine for rural communities in North Carolina and they are feeling a great deal of concern about rising corn prices.”

If North Carolina was a country, Mr Heiniger says it would be the world’s fifth-largest corn importer. Its poultry and hog farming industries are each valued at more than $2bn a year. The state boosted its corn production to record levels last year but still imports about 10 times more than it grows.

There has been little debate so far over food prices and ethanol during the North Carolina campaign – a reflection, perhaps, of the fact that the state’s rural farmers are most likely to be Republicans.

Concern about rising oil prices appears to have overridden concern about rising food prices as both candidates have continued touting the role of biofuels as an alternative source of energy.

James McDowell, political scientist at Indiana State University, says ethanol policy is less important in Indiana than Iowa because the state is less reliant on farming. “Indiana is a former steel producing state and the big issue is job creation,” he says. “Agriculture is important but it is not the over-riding concern like it is west of the Mississippi.”

The Financial Times

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