I don’t understand the promoters of ethanol. They seem to fail to understand a very simple proposition–if you take over 1/5 of the U.S. corn crop, and use it for fuel instead of corn, then the price of corn and its substitutes rises. Why is that so hard to comprehend?

There are multiple reasons that food prices are rising around the food, but ethanol is one of the big drivers. According to the NY Times:

Milk is up 17 percent, as are dried beans, peas and lentils. Cheese is up 15 percent, rice and pasta 13 percent, and bread 12 percent.

No food product has gone up as much as eggs, jumping 25 percent since February 2007 and 62 percent in the last two years.

What do things things have in common–corn. Cows and chickens eat a lot of corn. Beans, peas, lentils, rice, and wheat can be planted in some areas where corn is now planted and so high prices for corn is crowding out these products. Not all of this increase can be attributable to the government mandates to use ethanol, but ethanol is an important factor.

All this makes life more difficult for the poor who are just struggling to have enough money to buy food. In Indonesia some people have died from starvation and people are protesting because of high food prices.

I can’t believe the promoters of ethanol can’t see beyond their own pocketbook long enough to see that they are making life difficult for the poor. The WSJ held a conference on energy last week and one of the panels discussed ethanol:

Mr. Khosla [a venture capitalist] also sniped at Big Oil for fueling the criticism that corn ethanol is responsible for rising food prices. “The API started issuing press releases about food. Suddenly they got interested in the welfare of poor Africans.”
“We have never said anything about ethanol being responsible for food prices,” Mr. Cavaney replied. It was Federal Reserve Chairman Ben Bernanke in recent Congressional testimony who linked a 4.5% increase in food prices to rising worldwide demand and the amount of corn going to ethanol.

I wish Red Caveney would told Mr. Khosla and others ethanol promoters that they should care about the poor instead trying get governments to make people buy more of their products.

More and more people are understanding the harm that government mandates for ethanol causes. The NY Times is concerned about the biofuel mandate and at the WSJ energy conference only 21 percent of the attendees (mostly business people) thought that ethanol would play a significant part of solving the nation’s energy problem. Also AMD continues to take heat for their biofuel efforts about the world and that makes me happy because I’m no fan of ADM.