Irrational Infatuation with Biofuels

open quoteAre you upset about rapidly rising food costs and high gas prices? You can thank members of Congress and the administration for this situation. Much of the United States is in the midst of a major drought. That’s not the fault of the political class, but those folks have made the consequences of the drought far worse for the entire world.

First, the facts: Corn and soybeans are the biggest U.S. grain crops and are used in many of the foods that almost everyone consumes each day. Congress subsidized and mandated the use of ethanol in motor fuel. Currently, about 40 percent of the U.S. corn crop is used in the production of ethanol. Corn prices rose as a result of the government creating an artificial, additional demand. As a result of higher corn prices, many farmers grew more corn and fewer other crops, such as wheat, which, in turn, caused the prices of those other crops to rise because of lower production.

The drought is resulting in a much smaller corn crop, but by law, much of the remaining corn must be used to produce ethanol, resulting in even higher prices for corn, which reached a record high last week.close quote (Read more)

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