Posted August 16, 2012
The United States is experiencing one of its worst droughts in a half-century. But bad federal policy is making it worse by artificially increasing the cost of corn and other food. Worse, the federal government has the ability to waive its “food into fuel” mandates and lessen the impact of its policies, but the Obama administration refuses to do so—allowing food and fuel prices to continue to artificially increase.
The root cause of the problem is the Renewable Fuel Standard (RFS), originally passed in 2005 and expanded in 2007 through the Energy Independence and Security Act. That act requires that 13.2 billion gallons of corn-based biofuel (ethanol) be produced in 2012, consuming 4.3 billion bushels of corn—almost 40 percent of the nation’s corn crop—an amount just under the 4.6 billion bushels expected to be used as livestock feed. That compares to 1.6 billion bushels of corn, or about 13 percent of domestic corn production, that was distilled into ethanol in 2005.
The U.S. Department of Agriculture (USDA) is predicting the smallest corn crop in 6 years[i], with yield at its lowest level since 1995, largely due to drought. Because the United States is the world’s largest exporter of corn, it is likely that price spikes will ripple through not only U.S. markets, but globally as well.