Ethanol Follies

Fallout from the ethanol scam continues to hit the economy. Not only has the rise in the price of corn due to diverting part of the the crop for fuel made much of the food we buy in the grocery store more expensive, now the drive to plant more corn for ethanol production has caused a shortage in wheat:

Ethanol, a fuel that can be derived from corn products, set some of the rising grocery prices in motion. Demand for ethanol caused a worldwide shortage of corn this year, sending prices for futures of the crop on the Chicago Board of Trade above $4 a bushel last June, compared with about $2.50 two years ago. As farmers scrambled to grow more corn, crops such as wheat and soybeans were replaced, reducing their supply, according to Michael Swanson, a Wells Fargo agricultural economist. Droughts and poor weather that hurt crops in Australia and the Midwestern United States pushed prices for the corn sharply higher as demand increased from importers in North Africa and Europe. The Agriculture Department said this week that it raised its projections for wheat exports. That has trickled down to the shopping basket, as prices in July for cereal and bakery goods increased 4.1 percent from a year before, compared with 1.8 percent the previous year.

We are turning the agricultural industry in America upside down with this subsidized folly. It is raising the cost of groceries, driving up the inflation rate, and skewing the laws of supply and demand.

Ed Lasky:

So when inflation is pushed through the system-an inflation rate that may restrict the flexibility of the Federal reserve to cut interest rates for fear of stoking inflation-will we still look back on the promise of ethanol as being so bright?

As long as some farmers are benefitting and the green lobby is pushing it, I have no doubt we'll be forced to listen to the "benefits" of increasing our ethanol use for the foreseeable future.