Tuesday, January 15, 2008

Ethanol and food prices related to Congress?

On Food Inflation, posted Jan. 15 on "A Chequer-Board of Days and Nights," comments on the points made on "Cato-at-liberty" where it talks about ethanol issues. The story makes a point about food prices due to ethanol, "'Ethanol has increased the average American’s grocery bill $47 since July,' said Sen. Chuck Schumer, citing figures from Iowa State University." It goes on to point out that this problem is a result of taxes and tariffs set in place by Congress. To help along the ethanol industry, Congress put in place a 51-cent-per-gallon exemption from normal gas taxes and they put a 54-cent-per-gallon tariff on ethanol from foreign nations. Although this is useful for the ethanol industry, specifically boosting American ethanol producers, the demand for corn is through the roof which drives up grain costs, this includes the feed grain. This in turn is affecting farmers’ ability to feed and work with cattle in general causing them to have to raise the price of products such as milk. I agree with the writer of the story in saying that the tariffs on the foreign ethanol should be dropped. This is because there would be no significant blow to American ethanol, but by allowing the cheaper ethanol into the market would bring the demand on corn down which could in turn allow farmers to drop the high prices on other dairy products such as milk. The economy is going through some tough times as work is done to reorganize towards the use of ethanol as a viable fuel source, a noble and good move (I admit that I was decidedly wrong in being so cynical concerning ethanol in my last post), and lowering tariffs on foreign ethanol would be a good way to help the farmers work their way through these changes without forcing prices up. This would also be beneficial to the rest of the economy by allowing people to pay less for foods.

1 comment:

DiverDan said...

I am so sick of all of this oil and gas and ethanol talk my head is about to explode.... i have a solution... i am going to move to a commune where everyone farms all of there own food and uses solar power for everything, and the only modes of transportatoins are unicycles, unicorns, and seguiways( i have no idea how to spell that)..