The United Nations has chosen the wrong time to try to tame America’s corn monster. The global body wants Uncle Sam to prevent the nation’s drought from turning into a food crisis by suspending remaining support for corn-based fuel. Letting ethanol fend for itself makes sense and would stop diverting crops from hungry mouths. But the UN plea comes too late to affect the current crisis.
The United Nations is hardly the first to take aim at America’s perverse ethanol policies. For years opponents have been screaming that turning corn into fuel does almost nothing to lower greenhouse gas emissions, but does push up food prices around the world.
And, the US Congress has largely beaten the world body to the punch. Last year, lawmakers killed off a tax credit that paid oil refiners to mix in ethanol. They also removed trade barriers that protected home producers from more efficient Brazilian rivals.
Still, the farm lobby managed to cling to rules that force refiners to blend the biofuel into their gasoline. That will amount to about nine percent of this year’s overall pool of motor fuel. But waiving this requirement - a tall order in an election year - would take time to eat into demand for corn.
After years of official support, ethanol usage has taken on a momentum of its own. Refiners now use it as an octane booster in gasoline. Mixing ethanol with pricier petrol is a thrifty way to create better-performing fuel. As long as ethanol trades at a discount to gasoline - the difference was about 84 cents a gallon at last count, according to DTN, the agricultural news service - the biofuel will continue to consume a large portion of the corn crop.
Suspending this mandate would bring ethanol production this year down to 12.3 billion gallons. That’s just 600 million lower than what would be produced without a waiver, according to Bruce Babcock, an economist at the University of Iowa. It would still gobble up about 4.4 billion bushels of corn, or more than 40 per cent of this year’s stunted crop, based on the latest department of agriculture outlook. If the law is scrapped, as it should be, refiners would eventually wean themselves off corn ethanol - and food prices would fall, eventually. For now, though, America’s corn-guzzling monster looks unstoppable.
