Rich Lowry, on the insanity of our ethanol policy:

Prior to the Civil War, southerners genuflected before King Cotton. Now, we live in an era of King Corn. It is our most heavily subsidized crop.

We will plant 90 million acres of it this year, up 15 percent from last year. Still, the price of a bushel of corn jumped from $2 to $3 in the past year, thanks to the demand for more ethanol. This is increasing the price of corn-based foods — tortillas have become as much as twice as expensive in Mexico — and meat, poultry and dairy products, since livestock traditionally has been fed corn.

“In some parts of the country,” Jeff Goodell writes in Rolling Stone, “hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars.” The higher cost of raising livestock is naturally passed along to consumers. So, with its ethanol mandate, Congress has effectively passed an indirect tax on food. The big winners are agricultural firms that have locked up lots of land, since the price of cropland has gone up 14 percent in the past year. (If your local real estate is slumping, it’s only because you can’t plant corn on it.)

Milk is over $4 now. Eggs are over $1.50. Canned goods are up 10%-20%.

Gee, thanks, Congress.

I raise corn. When corn went from $2.25 to $.98 not to long ago, did the price of food go down? No. If any food item has 4 cents of corn or wheat or soybeans in it and it doubles in price, will thay be a cause for a 10 to 20% increase in the retail price? No.

I was going to disagree vigorously with Larry, but we do have other factors like somewhat more expensive oil and the ongoing inflation in the US Dollar. Still I see a few other ways that the current mess increases the cost of food and other products. First, raising food animals has grown more expensive due to the rising value of corn waste material. Second, there may be ethanol requirements (Minnesota has them for sure) that raise the cost of gasoline (and hence transportation costs) in the US. Third, some of the new corn comes at the expense of other food products. With less supply those products will become more expensive. Fourth, corn growing especially on marginal land consumes quantities of fertilizer, water, pesticides, farm equipment, etc. This increased demand will increase prices for these other products.

In other words, the new ethanol subsidies result in a change in the economy which makes the economy less efficient.

My take is that some of the current expensive prices are due to lag. In the long term, if the US government doesn't continue to screw with the economy, corn prices will lower somewhat. But keep in mind that things could be better if those subsidies weren't there. I suppose some people like Larry might have to find other work and the small group of rich elites who really benefit from the subsidies would have to find some other scam, but everyone else would have more money (and even small amounts over 300 million people is a lot of benefit).

Isn't corn one of the least efficient sources for ethanol?

I doubt it, ken. Corn has a very high sugar content for grasses, because of the enormous size of its kernels relative to other grass seeds.

It's the sugar that's important, because it's that which the microorganisms eat when you ferment it, so that they excrete ethanol.

But "efficient" is a complicated word. I'm answering on a per kilo basis. Surely the economic (per dollar) basis is more important, and on those grounds the best source of hydrocarbons for fuel is whatever raw material has almost no other use. Weeds, say. Even if you have to use lots more of the stuff per kilo of ethanol produced, if the raw material is otherwise useless, then it ends up being a win.

Of course, crude oil is just about the perfect source from the economic point of view, since it has few other uses. That's why it's the cheapest source of transporation fuel.

However, inasmuch as we are Homo irrationalus, we do not recognize that the price of the commodity (oil versus corn) tells us which is the more efficient to use, so we struggle to decide the question in some other, more complicated way.

I dunno. They say we're smarter than dinosaurs or voles, but I wonder, sometimes.

Here is an interesting further article on how much water it takes to product ethanol from corn.

http://www.topix.net/content/ap/2007/08/experts-differ-about-ethanol-water-usage

I don't buy into the whole bio fuel nonsense.
Land that can produce, should produce stuff to eat, stuff to eat for animals that we intend to eat, or stuff for us to use; like cotton, and flowers we can use to trade with women for sex.
I think this nonsense about reducing our dependence on foreign oil is foolish.
Pay the price, buy the oil, and use it all up. In the meantime work on hydrogen. This way we slowly change over to a hydrogen based fuel system.
So when all the oil is gone, the most expensive thing in the middle east is a camel ride, or sand to make our beaches fluffy and white.
This whole 'renewable resource' thing with corn is baloney. It reminds me of bananas. I like bananas. But remember the banana crisis a few years ago? We had a shortage a while back because the bananas were all clones and developed a virus or some crap that wiped them all out.
Knowing that the fuel industry will want a corn with a minimally diverse cob size, sugar content, bla bla bla, I worry that we will rely on a corn clone, or a very narrow type of corn that will place our entire economy at the mercy of weevils and molds.
Besides, the only thing more unpredictable than the Arabs is the weather.