Ethanol Mandates Causing Food Crisis

Ecnomist Milton Freidman encapsulated economics into the one-liner: "There is no such thing as a free lunch." We have learned it, in spades, with the recent climb in food prices, which has happened on the backs of increased US and EU mandates for biofuels, ie., ethanol and other food-to-fuel programs. The US and EU have put biofuels mandates that are taking food production offline and using it to make fuel.

We cannot have our cake and drive it too. Around 30% of US corn acreage is being used for ethanol production, and the come-uppance of this bad policy is in all-time high prices for wheat, rice and corn. For every acre set aside for ethanol is one less acre for corn for food, and the supply-demand imbalance is making prices ramp up in supermarkets - corn is up over 240% and other food commodities, including meat and eggs are also rocketing. The mandates are driving the commodities markets haywire. Its a huge huge mistake, brought to you by the global warming alarmists and anti-oil environmentalists ... and ADM.

Maybe it is a minority view (see previous post), but the clamor is growing to stop it.

NRO says "The Biofuels Disaster Must End":

U.S. dependence on imported energy continues to reach record levels while no commercially viable biofuels have been produced. At the same time, the government-subsidized burning of our food supply to create ethanol has both increased carbon dioxide emissions and driven up food prices at a startling rate. This must end.

This op-ed from environmentalists, Ethanol's failed promise, is a litany of the problems with food-to-fuel:

"Taking these together -- the environmental damage, the human pain of food price inflation, the failure to reduce our dependence on oil -- it is impossible to avoid the conclusion that food-to-fuel mandates have failed."

Senator Hutchison has come out against the ethanol mandate, she notes:

On Dec. 19, 2007, President Bush signed into law the Energy Independence and Security Act ... The bill required a huge spike in the biofuel production requirement, from 7.5 billion gallons in 2012 to 36 billion in 2022.

This was a well-intentioned measure, but it was also impractical. Nearly all our domestic corn and grain supply is needed to meet this mandate, robbing the world of one of its most important sources of food.

We are already seeing the ill effects of this measure. Last year, 25% of America's corn crop was diverted to produce ethanol. In 2008, that number will grow to 30%-35%, and it will soar even higher in the years to come.

... Congress must take action. I am introducing legislation that will freeze the biofuel mandate at current levels, instead of steadily increasing it through 2022.

This is a common-sense measure that will reduce pressure on global food prices and restore balance to America's energy policy.

Now governor Perry is asking for an ethanol mandate waiver as well. Kathleen Hartnett White, Director of the Center for Natural Resources, responded:

On Gov. Rick Perry’s request to waive the federal ethanol mandate “The Governor is correct to call for at least a partial waiver of the federal mandate for grain-based ethanol. Our federal government’s policies to subsidize and mandate the ever-expanding supply of ethanol are causing massive distortions in our economy, multi-billion dollar losses to our livestock producers, and severe hardships for Texas families.

“It takes 21 pounds of corn to produce one gallon of ethanol. One person could be fed for an entire year from the corn that we’re instead cooking for a single pickup tank of E-85.

“This year, the United States will convert 30 to 35 percent of its corn harvest into ethanol. Federal mandates and subsidies for ethanol production are generating a supply that will be far beyond what the United States is able to use.

“As the Governor noted, global food commodity prices have nearly doubled in the last three years, with corn rising even faster. Those higher prices are just now starting to show up on our grocery shelves, and Texas consumers are in for real pain unless we quickly move more corn back from our fuel supply to our food supply.

“A 50-percent waiver of the ethanol mandate is a good immediate-term step to alleviate the pain from spiraling food inflation. But with each new day bringing stories about double- and triple-digit increases in the price of food staples, domestic food rationing, and Third World food riots, the solution will only come when the U.S. Congress wakes up and reverses its mad rush toward ethanol.”

Bottom line: Congress is to blame - they made the law, they can undo it. This needs to become an issue in the upcoming election. Find out where your Congressional candidate stands.