Drought Recharges Ethanol Debate

By:  Bob Adelmann
08/15/2012
       
Drought Recharges Ethanol Debate

The current drought afflicting the country is driving up the price of corn and reviving the debate over ethanol mandates that redirect corn from food to fuel.  

Because of the drought, corn yield per acre this year will be the lowest since 1995, while the actual production of corn will be the lowest since 2006. A congressional mandate to turn corn into ethanol in order to reduce emissions requires converting nearly 40 percent of that harvest into 13.2 billion gallons of ethanol. That leaves precious little to feed cattle and people, driving up the price.

Last Friday’s biannual report from the Agriculture Department has re-ignited debate on the wisdom of using ethanol in gasoline to reduce emissions. Because of the drought, corn yield per acre this year will be the lowest since 1995, while the actual production of corn will be the lowest since 2006. A congressional mandate to turn corn into ethanol in order to reduce emissions requires converting nearly 40 percent of that harvest into 13.2 billion gallons of ethanol. That leaves precious little to feed cattle and people, driving up the price.

Since January the price of corn has jumped 22 percent, most of the increase since June. Marie Brill, senior policy official with ActionAid USA, explained:

If the U.S. only produces 10.8 billion bushels of corn and 5 billion bushels still goes to make ethanol, a shrinking percentage of corn is left for food and feed. It is time to rethink ethanol mandates that ensure that cars eat before people.

Pressure has been building on the Environmental Protection Agency (EPA) to back off on the mandate, at least until the drought is over. This would increase the supply of corn available for feed, and theoretically at least, reduce its price. In a free market, that’s exactly what would happen.

But the current production of corn and other foodstuffs is so regulated and politicized that such outcomes are far from predictable. Democratic governors Jack Markell of Delaware and Martin O’Malley of Maryland filed petitions with the EPA to waive the renewable fuel standard (RFS) and suspend biofuels production for the duration of the drought. 156 members of Congress have sent a letter to EPA administrator Lisa Jackson to scale back the RFS, while Representatives Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.) have sponsored a bill to force the EPA to cut back the RFS by 50 percent. And 25 Senators have written to Jackson urging her to back off the RFS as well:

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Photo: The sun rises over grain bins and a drought-struggling corn crop, Aug. 4, 2012 in Ashland, Ill.: AP Images

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