The corn fuel mandate is raising food prices and hurting the poor.
In 2007 and 2008, food prices spiked, resulting in much higher U.S. grocery bills and far more hunger in the poorest countries as the global supply chain buckled. The world may now be on the cusp of a 2012 reprise amid the drought in the Midwest farm belt, the worst in 50 years. Luckily, there are plenty of simple, modest things Washington can do to alleviate and even prevent another crisis.
The problem is that these fixes are opposed by a minor industry that adds little if any value to the economy, even counting its prodigious Beltway operations. Yup, the ethanol lobby strikes again. It can’t succeed without a mandate that forces consumers to buy its product every time they fill up the tank, and if the resulting corn shortages drive food prices up in a way that punishes consumers around the world, so be it.
On Friday, the U.S. Agriculture Department downgraded its 2012 corn forecast by 13% from last year’s crop, to 10.8 billion bushels. That would be the shortest harvest since 2006, even though the acreage planted with corn rose 4% since last year and is the highest since 1937. Scorching temperatures and little rainfall have left only 24% of the crop in good or excellent condition in the 18 major corn belt states, down from 72% in June. These represent the largest month-to-month potential declines in grain yields since the USDA started to keep records.
Also on Friday the USDA’s world agricultural outlook board estimated that global corn consumption will be off by 38.9 million tons, with the U.S. problems responsible for three-fourths of the shortage. The gap is likely to presage climbing basic-food commodity prices. Corn futures are up nearly 50% over the last six weeks. The U.S. market is so important because the U.S. accounts for 60% of global exports, and corn feeds cows, pigs and chickens and is also a key ingredient in all kinds of foods.
The purpose of oxygenated additives is to reduce VOC emissions between engine startup and catalyst lightoff. To accomplish this we replace 10% of the fuel with a lower BTU additive, which is a bit corrosive, decreases fuel efficiency, adds to the cost of driving and has the advantage of making food prices higher. Sure makes sense to me.