Amber Waves of Ethanol
I just came across two articles, one from a coulpe of weeks ago and one newer one, that do a good job at explaining exactly what the government's mandated use of ethanol is doing to food prices.
Amber Waves of Ethanol
The global economy is getting back on its feet, but so too is an old enemy: food inflation. The United Nations benchmark index hit a record high last month, raising fears of shortages and higher prices that will hit poor countries hardest. So why is the United States, one of the world's biggest agricultural exporters, devoting more and more of its corn crop to . . . ethanol?
The nearby chart, based on data from the Department of Agriculture, shows the remarkable trend over a decade. In 2001, only 7% of U.S. corn went for ethanol, or about 707 million bushels. By 2010, the ethanol share was 39.4%, or nearly five billion bushels out of total U.S. production of 12.45 billion bushels. Four of every 10 rows of corn now go to produce fuel for American cars or trucks, not food or feed.
This trend is the deliberate result of policies designed to subsidize ethanol. Note the surge in the middle of the last decade when Congress began to legislate renewable fuel mandates and many states banned MTBE, which had competed with ethanol but ran afoul of the green and corn lobbies.
This carve out of nearly half of the U.S. corn corp to fuel is increasing even as global food supply is struggling to meet rising demand. U.S. farmers account for about 39% of global corn production and about 16% of that crop is exported, so U.S. corn stocks can influence the world price. Chicago Board of Trade corn March futures recently hit 30-month highs of $6.67 a bushel, up from $4 a bushel a year ago...
This damage coincides with a growing consensus that ethanol achieves none of its alleged policy goals. Ethanol supporters claim the biofuel reduces U.S. dependence on foreign oil and provides a cleaner source of energy. But Cornell University scientist David Pimentel calculates that if the entire U.S. corn crop were devoted to ethanol production, it would satisfy only 4% of U.S. oil consumption.
The Environmental Protection Agency has found that ethanol production has a minimal to negative impact on the environment. Even Al Gore, once an ethanol evangelist, now says his support had more to do with Presidential politics in Iowa and admits the fuel provides little or no environmental gain.
Not that this has changed the politics of ethanol. When consumers didn't buy enough gas last year to meet previous ethanol mandates, the Obama Administration lifted the cap on how much ethanol may be mixed into gasoline to 15% from 10%. Presto! More ethanol "demand." On Friday the EPA greatly expanded the number of cars approved to use the 15% blend. Last month, Congressmen whose constituents benefit from this largesse tucked into the tax bill an extension of the $5 billion tax credit for blending ethanol into gasoline.
At a time when the world will need more corn and grains, it makes no sense to devote scarce farmland to make a fuel that exists only because of taxpayer subsidies and mandates. If food supplies tighten and prices keep rising, such a policy will soon become immoral.
Is Ethanol To Blame For Egypt’s Unrest?
Responding to rising demand and diminished supply, the worldwide food price index has risen to all-time highs, according to the Food and Agricultural Organization of the United Nations. The cost of all cereals, which includes wheat, rice and maize, jumped 39 percent in 2010, the World Bank reports, and the price of wheat alone rose by a staggering 74 percent between June and November.
Though the Egyptian government has subsidized wheat in an effort to combat the price hike, the high costs of certain food items, which has been a common complaint among protesters, have risen by 20 to 30 percent in recent months.
In the United States, as the ethanol industry, support by government subsidies, blossomed, corn has become more profitable than wheat and farmers have taken notice. Since it’s peak in 1981, the number of acres harvesting wheat in the United States has declined by 30 million, or nearly one-third, according to the Department of Agriculture. With the United States providing between 20 and 30 percent of the world’s wheat exports, the shift to corn is particularly troubling for countries that depend on wheat imports, especially as world populations continue to grow.
Of the corn that is produced, a growing percentage is being used as fuel instead of food. The Wall Street Journal reported that only 7 percent of U.S. corn crop went to ethanol in 2001. That number rose to 39 percent in 2010, and according to the Department of Agriculture’s ten year projection, America will continue to trade its amber waves of grain for green rows of corn.
At least there's some people out there who realize what the government's absurd promotion of the use of corn as fuel is doing. Unfortunately, no one is listening to them and we are continunig to use more and more corn as an inefficient fuel source instead of food.