Ethanol for Fuel takes 50% of Corn Crop

The U.S. Environmental Protection Agency (EPA) announced on Friday that would not grant a waiver of the Renewable Fuels Standard (RFS) this year. The EPA reported that they performed economic analysis with the U.S. Department of Agriculture (USDA) and U.S. Department of Energy (DOE) that showed waiving the mandate would reduce corn prices by approximately 1%. Economic analyses by DOE, showed that waiving the mandate would not impact household energy costs. As expanded under the Energy Independence and Security Act (EISA) of 2007, the RFS requires the volume of renewable fuel blended into gasoline to increase from 9 billion gallons in 2008 to 36 billion gallons by 2022.

Last year, approximately 40% of the corn crop was used for making ethanol, this year it looks like it will take almost 50% of the corn crop, or 5.05 billion bushels. The USDA has forecast total corn production for 2012 at 10.7 billion bushels, down 13% from 2011. The lowest U.S. production of corn since 2006. Yields are expected to average 122.3 bushels per acre, 24.9 bushels below the 2011 average and the lowest average yield per acre since 1995.

In wet weather and dry weather we are the largest producer of corn in the world, but we have a problem that nature and Congress created together, The Renewable Fuel Standard, RFS, creating a regulatory mandated demand for corn. In 2012 the RFS mandated ethanol consumed 5.05 billion bushels of corn. Much of the Midwest remains in drought conditions, and according to the most recent USDA report could impact the corn crop next year, too.

A significant portion of this year’s corn crop was destroyed by drought added to last year’s flood reduced yield, and lower corn inventories by 12%. The RFS diverts half of the corn crop into fuel leading to diminished supplies for livestock and food. We should not have to import corn to feed our nation either directly or feed livestock while we pay to convert corn into subsidized ethanol.

We are over using our water resources and essentially mining non-renewable water to expand our crops. Somehow the government decided for a slew of reasons that the corn crop needs to be double the demand for food and we should use corn to make ethanol to dilute gasoline. To fulfill this mandate we are using up our water resources and  we might be forced to buy corn, taking food from the mouths of poorer nations. Yes, we can buy more corn if need be. The United States is still a rich country and we will eat meat and the long list of food made from corn products and make lots of ethanol to dilute gasoline, but should we be doing that?

According to Tyler Cowen, professor of Economics at George Mason University, in his book, An Economist Gets Lunch, New Rules for Everyday Foodies, “(To put ethanol into gasoline) costs a lot more money than does traditional gasoline, once the cost of the subsidy is included. Sadly, it does not even make the environment a cleaner place. The energy expended in growing and processing the corn is an environmental cost too…the nitrogen-based fertilizers used for the corn are major polluters. Ethanol subsidies are a lose-lose policy on almost every front, except for corn farmers and some politicians.” “For millions of (people in poor countries) it is literally a matter of life and death and yet we proceed with ethanol for no good reason…(Biofuels) has thrown millions of people around the world back into food poverty.”

Energy Policy Act required EPA to implement a renewable fuels standard to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel. Ethanol may not be as renewable as the authors of the Energy Policy Act believed. This is the second time that EPA has denied a RFS waiver. In 2008, the state of Texas was denied a waiver. Both times EPA has concluded that the mandate did not impose severe harm.