Since 2005, the U.S. government has mandated that gasoline contain ethanol, mostly derived from corn. The policy intent was to reduce dependency on foreign oil imports and improve air quality. It has also been a boon for corn farmers.
But in the midst of the worst drought since 1934, the faults of this policy that forces nearly half the U.S. corn harvest into fuel production. And with corn prices at record highs, the ethanol requirements are fueling increased food costs and spreading it to the price of gasoline, which is up almost 40 cents a gallon since early July.
Beef and pork ranchers are slaughtering their herds at a record rate to cut their corn feed costs which have gone up more than 30% in three months. As a result, U.S. cattle herds next year are projected to be the smallest since 1952, a guarantee of more expensive food in years to come.
Th drought exposes the notion of trying to expand an industry where the economics of it don't make sense. Based on its energy content, ethanol is approximately 50% more expensive than gasoline and the acreage required to produce it distorts land prices.
Tractors run on diesel fuel that plow the fields, plant seed, harvest the crop and haul it to refining plants. Ethanol is also highly corrosive and can’t be transported by pipeline, unlike oil. Trucks or trains must carry the finished product to gasoline blenders. In short, ethanol requires more energy to produce than it actually yields, negating the environmental benefits.
Earlier this month the United Nations Food and Agriculture Organization issued a statement urging "an immediate, temporary suspension" of America's use of corn to produce ethanol, in order to "allow more of the crop to be channelled toward food and feed uses."
Natural disasters can't be controlled, but ethanol is a man-made disaster that needs to be stopped.
