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Drought, Food Prices, and Ethanol Subsidies


Posted by Tom Fletcher on Monday, August 13th, 2012, 2:38 PM PERMALINK


The country’s current policy on ethanol is one that is mired in fallacies and misguidance. The Midwest is currently engulfed in one of the worst droughts in recent memory and as a result food prices are increasing at an alarming rate. A recent Wall Street Journal article highlighted that, “the US agriculture department downgraded its 2012 corn forecast by 13% from last year’s crop, to 10.8 billion bushels.”   Furthermore because of the drought “only 24% of the crop in good or excellent condition in the 18 major corn belt states, down from 72% in June” and “represent the largest month-month potential declines in grain yields since the USDA started to keep records.”  The current shortage of corn that needs to be going to the market is instead being diverted into a scheme that is being sold as the solution to the country’s energy problems. The Renewable Fuels Standard “requires 13.2 billion gallons of ethanol to be blended into the gasoline supply this year and 36 billion gallons by 2022.” This creates an unfair burden on the consumer to pay more for less. There is even a growing consensus within the international community that the “fuel-to- food mandate” be re-evaluated.

“In 2010, the G-20 countries requested a consensus report from the various international agencies on how to better manage the risks of food price volatility after bread riots in two dozen countries from Brazil to Pakistan. The global bureaucracies—the WTO, FAO, IFAD, IMF, OECD, UNCTAD, WFP, IFPRI, UN HTLF and the World Bank—all signed on to recommendation six: "Remove provisions of current national policies that subsidize (or mandate) biofuels production or consumption."

 If the rest of the world can see the harms of this policy, why can’t we? 

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