Ethanol use forces up corn prices, other food prices

Published 1:37 pm Thursday, September 6, 2012

Except for corn growers and their suppliers, corn ethanol has long been a bad deal, and it’s getting worse.

Certainly, Delta farmers have done well by moving their acreage from cotton to corn to take advantage of a government mandate that forces refiners to include an increasing amount of corn-based ethanol in their production. No one should blame the growers here for taking advantage of a misguided Washington policy as long as it lasts.

But it’s still misguided to create an artificial demand for a commodity. The downsides are plenty.

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For instance, rising corn prices — fueled in part by the ethanol mandate — are bad news for poultry and catfish producers in Mississippi, for whom corn is a dietary staple of what they raise. These higher costs of production are passed on to consumers at grocery stores and restaurants, further pinching already strained wallets. And, of course, most of us have to buy gasoline that, spiked with ethanol, gives us lower fuel economy and messes up engines on our lawn mowers and trimmers.

And that’s not even to mention the worldwide implications of higher corn prices. In Third World countries, the rising cost of such a basic food staple can lead to shortages, riots and government instability.

So it makes sense to side with livestock producers and others across the country clamoring for a moratorium on federal regulations requiring corn-based ethanol in gasoline.

The Associated Press reports that a number of congressmen, from both parties, have signed onto a letter urging Environmental Protection Agency Administrator Lisa Jackson to relax ethanol production targets in light of corn supply concerns and spiking prices. Significantly, this is during record droughts in corn-producing areas. …

The Renewable Fuel Standard, enacted in 2005 and then significantly expanded in 2007, requires that 13.2 billion gallons of corn starch-derived biofuel be produced in 2012. The intent was to reduce both greenhouse gas emissions blamed for climate change and dependence on foreign oil.

But it has resulted in 40 percent of the nation’s corn crop going to ethanol producers, compared with 36 percent for feed. The rest is divided between processed food and exports. Critics say ethanol is a big factor in the price of corn going from an average $2.15 a bushel in the 1997-2006 period to more than $8 today. ….