Corn the New Tobacco? Nah

At first blush, the article published by SeekingAlpha and written by an equities researcher who believes that corn is the new tobacco and will similarly fall out of favor comes off like a screed that is so wide-ranging and speculative as to be nearly meaningless.

It looks that way at second and third blushes, too, and yet, there are nuggets of truth under all the bluster. Corn probably isn't going to ever be widely seen as a "slow poison," as Paul Christopherson puts it, but it's quite possible that, over the very long term, it will lose both its dominance over the food industry and its central place in the American diet. Christopherson admits that his thesis "will take years to prove out." But it's probably more like decades.

Christopherson, the senior vice president of research at Gilford Securities, argues that we are at "the beginning of a long-term secular decline in corn's fortunes." There are, or will be, a number of reasons for this, he says: corn-based ethanol is falling out of favor; government subsidies will decline because of fiscal tightening; and Americans are learning that a corn-based diet isn't good for them.

All are, to one degree or another, dubious propositions. The ethanol industry likely will shift further and further away from corn, the reliance on which, as Christopherson says, "was always a mistake." But how long that will take is still in question.

More dubious is the notion of a big reduction in corn subsidies. The Farm Bill, which just passed in May, continued the federal government's massive industry subsidies for five years, and it seems unlikely that the deeply entrenched government-corn complex will be broken apart in the next farm bill, or the one after that. And if Christopherson's theory that corn demand will fall is accurate, that will only put more pressure on Congress to continue writing checks.

As for Americans waking up to the insidious omnipresence of corn in their diets, it's impossible to tell at this point whether that will ever happen on a wide scale, and if it does, what consumers will be able to do about it. It is already is happening to some degree—Americans are drinking much less soda sweetened by high fructose corn syrup, for example. But HFCS is so ubiquitous, in everything from bread to fruit drinks disguised as juice, that the effect on overall demand hasn't amounted to much.

And it will take a lot of the "education" Christopher is calling for before Americans fully realize that most of their corn comes in the form of meat. It seems unlikely that demand for grass-fed beef will rise to a level high enough for the American meat industry to restructure entirely. That would take a massive governmental effort like the one espoused by Michael Pollan. But then we're back to that pesky fiscal crisis that Christopherson himself cites.

Christopherson, writing for an audience of stock investors, names companies that will be "negatively affected." They include Archer Daniels Midland, Monsanto, and Deere.

But if corn is the new tobacco, he doesn't mention that the tobacco industry is basically doing just fine, thanks to foreign sales. Take a look at the consumption habits of the burgeoning middle classes of developing nations such as China, and you'll see a lot of people lighting up a satisfying smoke after a hearty meal of corn-fed beef.

Corn picture by Harris Graber via Flickr.