America is Drunk on / Addicted to Ethanol?

I wanted to write earlier this week about how beef, chicken, and pork prices may jump because of growing interest in ethanol:

Corn ethanol to raise meat prices
Associated Press
Originally published March 10, 2007
WASHINGTON - Strong demand for corn from ethanol plants is driving up the cost of livestock and will raise prices for beef, pork and chicken, the Agriculture Department said yesterday.

Meat and poultry production will fall as producers face higher feed costs, the department predicted in its monthly crop report. Corn ethanol fuel, which is blended with gasoline, is consuming 20 percent of last year's crop and is expected to gobble up more than 25 percent of this year's crop.

The price of corn, the main feed for livestock, has driven the cost of feeding chickens up 40 percent, according to the National Chicken Council.

The most popular meat with consumers will soon cost more at the grocery store, the council predicts. The industry worries the competition from ethanol could cause a shortage of corn.

I thought this tied in nicely from a story a few weeks back about how rising corn costs will make tortilla's, a staple in the mexican diet, too expensive for for millions of improvished Mexicans.

Romancing the corn
The price of a tortilla is going up—and the United States is partly to blame. America’s infatuation with ethanol has a price south of the border. And in the aftermath of tight elections in Mexico, it’s enough to shake the political landscape.
Read more.

Although America may not be the "great satan" behind the rising price of the tortilla:

Washington, DC -– Rising tortilla prices in Mexico are due to a supply issue in that country – not increased U.S. ethanol production or U.S. corn prices.

The U.S. Grains Council (USGC) and the National Corn Growers Association (NCGA) report that lower corn production in Mexico and the lack of import licenses have caused white corn shortages there.

In any event, a recent AP article does an amazing job covering the emerging ethanol problem:

Biofuels Boom Raises Tough Questions
MATT CRENSON
AP National Writer

NEW YORK (AP) -- America is drunk on ethanol. Farmers in the Midwest are sending billions of bushels of corn to refineries that turn it into billions of gallons of fuel. Automakers in Detroit have already built millions of cars, trucks and SUVs that can run on it, and are committed to making millions more. In Washington, politicians have approved generous subsidies for companies that make ethanol.

And just this week, President Bush arranged with Brazil's President Luiz Inacio Lula da Silva for their countries to share ethanol production technology.

Even alternative fuel aficionados are surprised at the nation's sudden enthusiasm for grain alcohol.

"It's coming on dramatically; more rapidly than anyone had expected," said Nathanael Greene, a senior policy analyst at the Natural Resources Defense Council.

You'd think that would be good news, but it actually worries a lot of people.

The problem is, ethanol really isn't ready for prime time. The only economical way to make ethanol right now is with corn, which means the burgeoning industry is literally eating America's lunch, not to mention its breakfast and dinner. And though ethanol from corn may have some minor benefits with regard to energy independence, most analysts conclude its environmental benefits are questionable at best.

Proponents acknowledge the drawbacks of corn-based ethanol, but they believe it can help wean America off imported oil the way methadone helps a junkie kick heroin. It may not be ideal, but ethanol could help the country make the necessary and difficult transition to an environmentally and economically sustainable future.

There are many questions about ethanol's place in America's energy future. Some are easily answered; others, not so much.

...

WHAT ABOUT ETHANOL'S ECONOMIC BENEFITS?

Making ethanol is so profitable, thanks to government subsidies and continued high oil prices, that plants are proliferating throughout the Corn Belt. Iowa, the nation's top corn-producing state, is projected to have so many ethanol plants by 2008 it could easily find itself importing corn in order to feed them.

But that depends on the Invisible Hand. Making ethanol is profitable when oil is costly and corn is cheap. And the 51 cent-a-gallon federal subsidy doesn't hurt. But oil prices are off from last year's peaks and corn has doubled in price over the past year, from about $2 to $4 a bushel, thanks mostly to demand from ethanol producers.

High corn prices are causing social unrest in Mexico, where the government has tried to mollify angry consumers by slapping price controls on tortillas. Lester R. Brown, president of the Earth Policy Institute, predicts food riots in other major corn-importing countries if something isn't done.

U.S. consumers will soon feel the effects of high corn prices as well, if they haven't already, because virtually everything Americans put in their mouths starts as corn. There's corn flakes, corn chips, corn nuts, and hundreds of other processed foods that don't even have the word corn in them. There's corn in the occasional pint of beer and shot of whisky. And don't forget high fructose corn syrup, a sweetener that is added to soft drinks, baked goods, candy and a lot of things that aren't even sweet.

Some freaks even eat it off the cob.

It's true that animals eat more than half of the corn produced in America; guess who eats them? On Friday the Agriculture Department announced that beef, pork and chicken will soon cost consumers more thanks to the demand of ethanol for corn.

It's also true that there's a difference between edible sweet corn and the feed corn that's used for ethanol production. But because farmers try to grow the most profitable crop they can, higher prices for feed corn tend to discourage the production of sweet corn. That decreases its supply, driving the price of sweet corn up, too.

In fact, many agricultural economists believe rising demand for feed corn has squeezed the supply - and boosted the price - of not just sweet corn but also wheat, soybeans and several other crops.

America's appetite for corn is enormous. But Americans consume so much gasoline that all the corn in the world couldn't make enough ethanol to slake the nation's lust for transportation fuels. Last year ethanol production used 12 percent of the U.S. corn harvest, but it replaced only 2.8 percent of the nation's gasoline consumption.

"If we were to adopt automobile fuel efficiency standards to increase efficiency by 20 percent, that would contribute as much as converting the entire U.S. grain harvest into ethanol," Brown said.

Read the Full Article... a must read if you are interested in Ethanol.