Wednesday, August 22, 2012
For much of the summer the country's midsection has dealt with a significant drought, deemed worst for the U.S. in decades. In Missouri the drought has been especially hard hitting, as 95 percent of the state is considered to be in extreme drought or worse.
The drought has led to a number of issues, including cracks in basements and withering gardens. Many in the agriculture industry have also dealt with challenges, as will consumers through rising food prices.
Though many farmers in Southeast Missouri were expected to have some of the best corn yields in the country this year, this is primarily due to accessible irrigation. For other farmers, the drought has led to much lower yields. In fact, it's expected the average yield will be 123 bushels per acre -- the lowest in the last 17 years. With these poor yields, the price of corn has climbed to more than $8 a bushel.
Corn is a key ingredient in many products and is used as feed for livestock. Because of the Renewable Fuel Standard, signed into law in 2005 and expanded in 2007, it's also used in gas blends. This year the law will lead to the production of 13.2 billion gallons of corn starch-derived biofuel.
According to a recent story from The Associated Press, 40 percent of the corn crop in the U.S. goes to ethanol producers while 36 goes for feed. This breakdown, combined with lower yields due to the drought, has led some to call on the EPA administrator to issue a waiver that would reduce ethanol production targets.
We support the exploration of alternative fuels, as well as other policies that could potentially lead to lower gas prices and a cleaner environment. But there's a good argument to be made that not only should waivers be issued this year, but that the federal government should not be in the business of mandating the ethanol blend.
As we've seen in numerous other examples of government picking winners and losers, the ethanol mandate comes with its own set of unintended consequences.
A report by James M. Griffin and Mauricio Cifuentes Soto from The Mosbacher Institute at Texas A&M University suggests the mandates have had a significant effect on food prices while providing minimal relief to consumers at the pump. When you consider the escalating mandates for ethanol, it's all the more concerning.
Maybe ethanol has a role to play in the U.S. energy market, but the federal government's increasing mandates for it are short sighted -- particularly now. The U.S. continues to face many economic challenges, and this summer's drought has not helped. Contributing to these challenges via burdensome EPA mandates on fuel blends would be imprudent going forward.