The Government Mandate For Higher Food Prices


This article from the WSJ is a few days old but it’s still noteworthy for anyone who buys food, which is just about all of us. Heck, even if you’re on food stamps, thanks to the government those EBT cards don’t pay for as much as they used to. That’s because the government has mandated that we put food in our gas tanks. They might blame the recent drought, but that’s a temporary problem, the bipartisan mandate to increase our food and fuel prices is permanent.

Under the federal mandate, Americans must use 15 billion gallons of ethanol in gasoline ­annually by 2015. To meet this goal, 5.3 billion bushels of corn per year—equal to more than 40% of the 2011 corn crop—must be processed and burned as ­ethanol, not used for food or livestock feed.

The result: higher prices across the entire food chain, from products directly containing corn to protein raised on corn feed and crops that compete with corn for farmland. That includes the bread on the table, the eggs at breakfast, the chicken or steak at dinner, and almost all dairy products.

Since the enactment of the ethanol mandate in 2005, the use of corn in ethanol has skyrocketed to more than five ­billion bushels per year from 1.3 billion. Corn prices immediately began to rise, too, and in each year since they have exceeded the highest price seen between 1976 and 2006. Price increases also spread to other parts of the agricultural sector, as farmers switched to corn from other crops and livestock.

New research by PricewaterhouseCoopers (on behalf of the National Council of Chain Restaurants) finds that by the time the mandate’s 2015 goals are met, it will have caused a 27% increase in corn prices. ­Increased corn prices have ­already led to higher prices for other commodities, such as soybeans (by up to 16%), pork (by up to 15%) and poultry (by up to 8%).

So, you’re thinking it’s just a trade off for a cleaner environment. If only that was true.

All the while, it isn’t clear what good ethanol use will be doing for the environment. This is especially true if the long-run impact of increased corn production is to convert forests into croplands, substitute normal crop rotation with practices that use more fertilizers, and further tax local water resources. If so, any net reductions in greenhouse-gas emissions can disappear altogether. (Read More)

Not to mention that turning corn into fuel uses a lot of energy and burns through a lot of carbon.

The author of the article works for the restaurant industry, where they’re seeing higher prices for the food they serve. But we’re all paying the price, whether it’s at a restaurant or the grocery store.

Oh well, what do you expect from a government that’s over $16 trillion in debt and still pays farmers not to farm.

(Image credit)

Update: Linked by Big Pulpit – thanks!

Update: Linked by Coffee and Sleepless Nights – thanks!