NCPA - National Center for Policy Analysis

Ethanol Subsidies Have Doubled Corn Prices

August 16, 2011

In early July, it appeared that a bipartisan group of senators had come up with a plan to end the 45-cents-per-gallon corn ethanol subsidy almost immediately rather than wait for it to expire, as planned, on December 31.  But that deal never passed both houses of Congress.  The result: $6 billion in annual subsidies are still being given to an industry that is helping drive up food prices during the worst recession in modern history, says Robert Bryce, a senior fellow at the Manhattan Institute.

The ethanol industry will continue getting subsidies while gobbling up gargantuan quantities of corn, which, in turn, is increasing the cost of food at the grocery store at the very same time that huge numbers of Americans are unemployed and/or collecting food stamps.

  • The official U.S. unemployment rate stands at 9.1 percent, but the actual rate of underemployment may be closer to 23 percent.
  • Furthermore, 45.7 million Americans -- about 14.6 percent of the population -- now rely on federal food stamps.
  • Since October 2008, the number of Americans relying on food stamps has jumped by 48 percent (that's 14.9 million people) and enrollment in the program has increased for 32 consecutive months.

Today, about 40 percent of all U.S. corn -- that's 15 percent of global corn production or 5 percent of all global grain -- is diverted into the corn ethanol scam in order to produce the energy equivalent of about 0.6 percent of global oil needs.  Corn prices, now close to $7 per bushel, have more than doubled over the past two years, says Bryce.

Source: Robert Bryce, "Pork Barrel Ethanol Subsidies Have Doubled Corn Prices," Washington Examiner, August 10, 2011.

 

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