Record-high corn prices should be sending a clear message to policy makers in Washington: Requiring people to put corn-based fuel in their gas tanks is a bad idea.
Since 2005, the U.S. government has mandated that gasoline contain ethanol, almost all of it derived from corn. The policy, ostensibly aimed at reducing the country’s dependence on foreign oil and at improving the environment, has been a bonanza for farmers. Land planted with corn soared by a fourth after Congress passed the Energy Independence and Security Act of 2007, which required that gasoline producers blend 15 billion gallons of ethanol into the nation’s gasoline supply by 2015.
Now the drought of 2012, the worst in more than 50 years, is making clear the downside of a policy that leads the U.S. to devote 40 percent its corn harvest to fuel production. With this year’s crop expected to be the smallest in six years, corn prices have jumped 60 percent since June. The ethanol requirements are aggravating the rise in food costs and spreading it to the price of gasoline, which is up almost 40 cents a gallon since the start of July.
Bloomberg has the full article