Middle America is in the middle of a drought, meaning that corn production will fall to a 17-year low, according to an Agriculture Department report.
But a drought for some is a boom for others, as farmers who do harvest corn this year will enjoy record high prices. Projections show that corn prices may skyrocket to about $8 a bushel and corn futures have already risen to $8.29 a bushel.
For farmers and ranchers, low yields and higher prices are part of the risk involved in their livelihood, but thanks to government ethanol standards they have another big corn consumer causing higher prices.
The Renewable Fuel Standard, which Congress expanded in 2007, requires that over 13.3 billion gallons of biofuel be produced in 2012.
That’s right, legislation passed over five years ago, is dictating our food prices today. Currently over 40 percent of the United States corn crop is being sent to ethanol producers, which is over half of what is used for livestock feed. Whereas farmers have enjoyed years of propped up corn prices, the march to burn more corn for fuel puts livestock producers in a pinch.
That’s why livestock producers are asking EPA administrator Lisa Jackson to relax the Ethanol targets. If less corn goes to ethanol production, more can be used for food and livestock production. But the Obama administration is unlikely to drop the requirement as it would impact the ethanol industry, subsidized by government to prop up corn prices in the Midwest.
“Seventy percent of cattle country is under drought conditions,” the National Cattlemen’s Beef Association president J.D. Alexander said to the Hill. “I am not asking for a handout. I am just asking for the federal government to let the market work.”
For years both Republicans and Democrats are finally seeing the consequences of their protectionist mandates and subsidies for corn ethanol. Already food prices have jumped 6 percent, as countries and businesses are stockpiling as much corn as possible ahead of an expected shortage.
Common sense tells you that if you burns food for fuel, eventually you will run out of food. Now, thanks to another clumsy government intrusion, both food and fuel will rise in upcoming months.