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  • Ethanol Mandate Ignores the Free Market

    In the midst of one of the most severe droughts on record, Washington’s ethanol mandate is making the corn shortage even worse. Markets have responded quickly and flexibly to the drought where they can, but some corn buyers are sidelined by the rigid government ethanol mandate.

    Corn prices are skyrocketing, and livestock farmers are suffering from the high price of corn-based feed. Nonetheless, the government mandates that 13.2 billion gallons of corn ethanol must be produced in 2012. The mandate has not been changed at all in response to changing real-world conditions, despite repeated pleas from American beef and pork farmers.

    Under a free market system, the pain of the drought would be spread around—corn growers, livestock farmers, fuel producers would earn a little less than usual, and the consumers of corn, meat, and gasoline would pay a little more. A free market allows participants to change the quantities they supply or demand in response to price fluctuations.

    A government mandate, by contrast, fixes quantities and forces prices to rise rapidly when nature reduces the supply. In this case, livestock farmers and corn consumers—including the poor in America and abroad—bear the brunt of the inflexible ethanol mandate. Even in a good year, the ethanol mandate makes food more expensive for American consumers. The Heritage Foundation’s Nick Loris has written further on the damage done by government mandates and subsidies in the corn ethanol industry.

    No government policy can restore the corn lost to the 2012 drought, but a compassionate government would permanently repeal the ethanol mandate and allow Americans to meet one another’s needs at mutually agreed prices in a free and flexible marketplace.

    Posted in Energy, Featured [slideshow_deploy]

    39 Responses to Ethanol Mandate Ignores the Free Market

    1. to supply the ethanol mandate I and thousands of farmers have gone from a corn bean rotation to a corn corn bean rotation. If the mandate ends next year we will go back to a corn bean rotation and millions of acres of corn won't be planted——–during a corn shortage!!!!!!! It is simple economics. You also run the risk of destroying an industry that has virtually ended the need for crop subsidies. If you want this commodity produced you have two choices. No. 1, end the mandate and go back to paying tens of billions to farmers to grow a crop that cost them more to grow than they receive when they sell it or N0. 2, leave the mandate alone where there will be no need for subsidies and where the free market will balance itself out.

    2. Susan Gabel says:

      What noone in the media (and the Heritage Foundation neither) talks about is the issue of the corn that is
      used for ethanol is also used as feed. In other words, when they are done taking the "ethanol" out of the
      corn, you have a by-product called DDG's or distillers grain left. This grain is them sold and shipped out
      to livestock farmers to feed to their livestock. So the corn is not "lost" as the food or fuel debate suggests.
      I believe maybe a third of the corn used for ethanol is lost as a feed, and the other two-thirds is still fed to our
      livestock. Why is it that the media never talks about this? Do they no know or choose to ignore for the
      sake of bashing the ethanol industry?

      • Scott says:

        it's because despite the amount still available as feed, you can't ignore the amount of corn that is no longer available to be used in many final products. Also, if a third of the corn used to produce ethanol is lost, don't you think that a loss of one third of anything on that scale can be devastating to the market? Imagine you were carrying around $1000 and you were going to use that for your rent, if you suddenly lost one third of it, wouldn't that be devastating to your ability to pay rent? Maybe it's not a strong analogy but I think it makes my point.

    3. Stirling says:

      In a sane world people use food to feed people (not to fill our gas tanks) .. How arogant the government is to think that a situation like the drought of 2012 would not happen at some point. It's just like all government programs that "sound good" but have disasterous consequences when the worst case senario is realized.
      Add Ethanol to the list of programs that are a government "FAIL".

    4. Ohio Joe says:

      We should not be using food for fuel.

      When will the US once again be allowed to drill for oil and other traditional forms of fuel?

    5. Toledotim says:

      Greed! Greed! Don't you know when the price of corn goes up, that more farmers will plant corn next year. Markets are for the greedy. The real world has businesses have the next two years planned.

    6. RFinVA says:

      How is the corn crop in Canada doing? Corn futures must also be based on the cost to ship corn to distribution centers in the U.S.

    7. Tyler says:

      Al Gore has even admitted that this was nothing more than political to win the farm vote at the time. So why is it that we can't get rid of this terrible legislation? They can pass crap in a heart beat but it takes forever to undo the bad legislation.

    8. Pete Houston says:

      This is easy to understand. A bag of corn used to cost $2.50 a 50lb bag and now is between $8 to 11.50 lb a bag. The corn feeds the chickens and hogs. It is obvious that the price of food is going to go up. Even if you buy feed by the ton for your livestock, it is going up by a cost of 3x or more. Since the lower end of society spends more of their money on food then pleasure items, the ethanol program hurts the lower end of the population more than the higher end of the population. Why do we come up with these programs that keep hurting the little guy that is just trying to make ends meet. Hard to believe that this administration cares about any one but themselves. The ethanol program should be supported by the market and not the government. Another program that is supposed to make things better but makes things worse.

    9. Georgia girl says:

      Just took a trip through Kansas and Missouri. OMG, cornfields were brown all over. Missouri's windmills weren't moving. Give them a break!

    10. Kathy says:

      Could we please get someone in Washington, D.C. that love to make these decisions to use their God-given brains. How about anyone who really knows about business, how it works, and has an ounce of common sense. We need some serious help!

    11. Jim the farmer says:

      I would be nice if the government would just stay out of business instead of creating excuses to put our money in their friends pockets. They have killed this town with subsidized housing over 70% of licensed rentals are government subsidized in Avon Park Fl. Then they killed the housing/realestate market by forcing banks to make bad loans. Now they are outlawing livestock farmers from buying American corn.
      This is the 3rd business of mine that the govbernment has distroyed. Any ideas of something they can't mess up.

    12. Biofuels are an important, successful part of America's "all-of-the-above" energy portfolio. A great source of domestic energy, biofuels can be produced in every state, creating American jobs and industry while also lowering fuel costs.

      Check out these facts:

      The impact of corn on food prices is overblown. According to US Department of Agriculture (USDA), “Historically, if the farm price of corn increases 50 percent, then retail food prices as measured by the Consumer Price Index (CPI) increases by 0.5 to 1 percent.” (Source: USDA, http://1.usa.gov/ONCzk5)

      And, ethanol lowered gasoline price for drivers by an average of $1.09 in 2011, according to Iowa State University’s Center for Agricultural and Rural Development. (Source: Iowa State University, http://bit.ly/JJyJJl)

      Get all the facts on biofuels at http://www.energyfactcheck.org

      • Stirling says:

        Corn is food for many purposes, when so much of the crop is consumed by Eithanol requirements (that could be used for the food supply) you get a supply/demand issue.. thus higher prices when supply is short. How is higher prices a GOOD Thing ??? When I'm paying a boatload more next year for groceries you sir will be the butt of my jokes.. and I will never buy a biofuel vehicle as a result of your insistance that buring food for fuel is a good idea..

      • LJD says:

        The fact is that at my local feed store cracked corn prices to feed my animals has increased substantially this season. Period.

      • Guillermo says:

        Not impressed with your cherry picked facts…

        The American nation is very rich and blessed. We spend little of our wealth on food. Try running your numbers again for a 50% increase in corn prices for people living in Mexico or Honduras. Please report these facts for us. Compare how much they spend on food as a percentage of income. I dare you. I suspect that you will have to dodge my challenge.

        There is a tremendous moral dimension to this debate.

    13. richard holmes says:

      What we have in Washington is not a government, it is a dictatorship. Revolt against the machine.

      • richard holmes says:

        So iif I don't voice my opinion that coincides with your predetermined leftist guidelines I will not be heard.
        How socialist. Thank you Big Brother.

    14. richard holmes says:

      What we have now is a dictatorship in Washington

    15. richard holmes says:

      Just let me know what type of censored openion I can vioce on this socialist website to get heard!

    16. richard holmes says:

      What kind of openion web site is the foundry?

    17. backwaterbilly says:

      Why has this administration not been called out on this inept policy.They are hurting the very ones that they claim to be the champion for the most, just like their backwards approach to dependancy programs.Ethanol subsidies should be halted immediately & this administration wants to increase them.November can't get here to soon.

    18. randydutton says:

      No one in their right mind would put 10% ethanol into their open-cycle engine or older car, and thus is should be up to consumers to decide if they want the stuff destroying their assets. Ethanol destroys many of America's 300 million open cycle engines. Want proof? Read the report at the Outdoor Power Equipment Institute, or visit the http://www.historicvehicle.org/ website and read their section on ethanol destroying older cars. Boats, ATVs, snowmobiles, chainsaws, generators, power equipment, and much more are at risk.

      • LJD says:

        This is true. We have to completely flush out our boats, atv, log splitter, chain saws etc on a regular basis… Not a lot of people realize this and they pay out the nose to repair or replace equipment.

    19. Ken Ernandes says:

      A clear example of why government regulation is severly flawed and why free market forces will do the right thing far more frequently.

    20. zenga says:

      our country is being run by a community organizer. why would anybody expect to understand fundamental economics. i mean, just because he's the President doesn't mean he has to be bright.

    21. Jeff Willis says:

      This is essentially why E.P.A. needs to be turned back over to the states, in accordance with the 10th amendment of the U.S. constitution. It os opperating as a dictitorial force and an arm of the administration. It['s cretion was never intended to work in such a manner. It must be transformed into a constitutionally compliant entity.

      It goes back to a famous statement that came from Thomas Jefferson:

      "When people fear the government, you have tyranny. When government fears the people, you have liberty."

    22. CforUS says:

      Why on earth would we want to suspend the mandates that the lobbiests worked so hard on in favor of slowing the increases in food prices for every day Americans? Every day Americans don't lump sum contribute to campaigns, pay for junkets, or take congressmen out to lavish dinners.

    23. It's all part of the plan to make fuel and food prices skyrocket.

    24. PonchoVilla says:

      while I agree that Government rarely does that which is "common sense" nor does anything in a timely fashion. Hence the age-old adage "Never let government do for the people what the people can do for themselves" and the Oxymoron "Hi; I'm from the government and I'm here to help". I take offense to the Insult to Intelligence proffered in this article. First: Distiller's Grains are, almost without exception, sold to farmers as animal feedstock. with a feed to bulk weight gain of more than twice that of simple grain. (Owing to the high percentage of proteins and low percentage of carbs remaining after the Alcohol it rendered out). Simply put it's more efficient to produce beef from corn after mashing and distilling out the alcohol then if you just fed the corn to the animals and let the animal process (metabolize) only the appox. 45% that they would normally not just pass into manure. (Percent for grain is only slightly higher then that of hay/grass which is roughly 30%). whereas the Distillers grains (Leftovers after ethanol production) being partially broken down protiens and unconverted carbs are far more easily and fully processed in animal gastro- systems for conversion to meat (Albeit somewhat leaner in my experience).

      SO if your Jack Sprats wife (Who could eat no lean) then maybe the article's author could be counted as telling the truth – But everyone else ought to get informed and realize that ethonal byproducts FEED US….

    25. Ken Marx says:

      Do I understand correctly that it takes more than a gallon of fossil fuel to produce a gallon of ethanol? If this is so and combined with other considerations, this program makes no sense on any level. I cannot fathom why Congress has voted time and again to extend ethanol subsidies. It's just insane!

    26. Scott Soper says:

      Ethanol and wind power need to go away and drilling for oil needs to start in a BIG way!!!

    27. Bobbie says:

      get rid of the illogical nonsense coming from government intervention where there's no constitutional reason for their input. Free market rules without government intrusion or government abuse of freedom to corrupt everywhere and one possible.

    28. Scientist5 says:

      Let’s talk about the drought and its effect on the US corn crop. Disastrous, however, what is left will be dedicated to the manufacture of ethanol. Even a good crop steals food from the mouths of the hunger. Yes, and even from the animal feedstocks.
      The big question about ethanol is its cost and environmental compatibility. First, let’s use the price of gasoline (pure petroleum gasoline) at $4.00 per gallon – 20-25% of this price goes to ethanol. Forward – a gallon of gasoline without ethanol = $3.76 vs. $4.00 w/15% ethanol. Taking into account the energy variation – one gallon of gasoline gives 1.64 times the energy output of 1 gal of ethanol, so ethanol has only 61% of the energy output of the equivalent amount of gasoline. Which one pollutes more? Remember CO2 is CO2 regardless of its origin.
      Want to know more about energy – http://energycrisis12.blospot.com . See my e-book – The Sky Will NOT Fall – Unmasking the Green Revolution. (Amazon, Barnes & Noble).

    29. fredh says:

      Ethanol treated gasoline is pure garbage. There are two gas stations in the town I live in and they are ethanol free. Since changing over to their gas, my gas mileage as gone up 10 percent. My 2006 Nissan, I went from 24 miles per gallon to 28 miles per gallon around town, and on the highway I get up to 43 miles per gallon. My lawn mower starts after one pull. California wants to eliminate ethanol, it is no good for engines. The price of beef has skyrocketed , why not feed this corn to cattle. As long as Monsanto keeps their hands off the corn.

    30. Fred Hammel says:

      Ethanol treated gasoline is pure garbage. There are two gas stations in the town I live in and they are ethanol free. Since changing over to their gas, my gas mileage as gone up 10 percent. My 2006 Nissan, I went from 24 miles per gallon to 28 miles per gallon around town, and on the highway I get up to 43 miles per gallon. My lawn mower starts after one pull. California wants to eliminate ethanol, it is no good for engines. The price of beef has skyrocketed , why not feed this corn to cattle. As long as Monsanto keeps their hands off the corn.

    31. Tom C. says:

      Just one more example of the Government screwing the people they were elected to represent. Ethanol mandates should have been gone long ago, drought or no drought.

    32. Mike, Wichita Falls says:

      Unfortunately, when we're dealing with regulations versus taxes, the government can easily blame the so-called free market for higher prices and then demand more regulations to reign in those evil profiteers.

      The President likes to say we cannot go back to the failed policies of the past where the free market ran roughshod over the consumer. I like to say those policies of the past failed because there was only a regulated market that favored one group of consumers over another.

    33. Jeanne Stotler says:

      I had a nice Olds Station wagon in the "80's and everyone was talking about ethanol being a cheap alternative to gasolin, In Florida, they could us the rements from the sugar cane. Well tried it and found myself broke down in the middleof no-where. I worked 3nights(total 6 shifts) a week in Lee County and on Fridays drove across state to Palm Beach County and worked 3 shifts there, it was on a return trip,a sunday afternoon, with 3 kids that I broke down, scarry but Ethanol destroyed my engine. Ban ethanol, feed the cattle and lower beef prices. Drill for oil here, stop substidizing foriegn goverments.

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