Corn based ethanol is too expensive

March 17, 2008       Editor: Dave Uphoff
After suffering through an usually long, wet, and cold winter everyone breathed a sigh of relief last week when the temperature got up to 60. But just as we get our spirits up with the knowledge that spring is just around the corner, bad economic news confronts us. Gasoline prices are up to $3.40 a gallon and likely to hit $4 by the summer. To cap it off, food prices are going up because of the increased demand for corn and wheat.

To combat these problems the Federal Reserve is lowering interest rates in an attempt to get banks to start loaning again and for businesses to start borrowing again in order to expand and grow. In May some individuals will be receiving a $600 stimulus check from the government in hopes it will get consumers to start spending again.

The reason for the high price of corn is due not only to increased demand by makers of ethanol but also because foreign countries have increased their purchase of corn and wheat due to the cheap dollar overseas. The benefits derived from using corn based ethanol are more than offset by the increase in food prices caused by the high demand for corn. The high price of corn has caused hardship for livestock growers as well as the consumer.

We need to stop using corn to produce ethanol as it is too inefficient to convert corn. Some experts are suggesting that cellulose based crops such as switch grass and sugar cane need to be used instead. But some studies have shown that the energy used to make ethanol from any source is greater than the amount of energy obtained from ethanol.

The real problem is that the government is bypassing the marketplace by subsidizing corn growers to the tune of $9 billion dollars a year to create an artificial market for corn. By mandating a certain amount of ethanol must be produced each year, the price of corn is driven even higher. Minus the federal mandates and corn subsidies it would be up to the marketplace to determine if it is profitable to make ethanol.

Farmers are now given direct payments for growing corn that is independent of productivity or price. This doesn't make economic sense. Our energy program would be further ahead if the government money spent on subsidies for corn and ethanol had been spent on research to produce electric cars and energy production alternatives utilizing solar, wind, and geothermal sources instead.

The government must stop subsidizing the making of ethanol and let the market forces determine the best use of corn. By interfering with the marketplace the price of corn has become artificially high and creating a hardship for everyone. And our energy needs are not being resolved.

Other links to corn subsidies and ethanol.

International Herald Tribune
Washington Post
Farm Subsidy Database


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