In about six weeks, Lisa Jackson, administrator of the U.S. Environmental Protection Agency, must make a decision that could have a major effect on the livelihoods of farmers and ranchers. The decision may or may not raise the price of
In about six weeks, Lisa Jackson, administrator of the U.S. Environmental Protection Agency, must make a decision that could have a major effect on the livelihoods of farmers and ranchers. The decision may or may not raise the price of gasoline, but it will affect the supermarket prices for meat and many other products. It could well raise the prices of fast-food burgers, chicken, soda and your Thanksgiving turkey. It could even affect the price of whiskey.
Not to overstate matters, but the decision could have something to say about how many million people in the African Sahel will die from starvation or malnutrition in the next few years.
Jackson must decide, under section 211(o)(7) of the Clean Air Act, how much renewable fuel — most of it corn-based ethanol — must be added to U.S. gasoline supplies in the next year. This year’s renewable fuel standard calls for oil companies to add 13.2 billion gallons of ethanol to fuel stocks. Next year’s standard is 13.8 billion gallons.
You can get almost three gallons of ethanol out of a bushel of corn. So meeting this year’s standard will require about 4 billion bushels. In a normal crop year, more than four out of every 10 bushels are used for ethanol. Another four out of 10 go to feed livestock and poultry.
This year is not normal, though climate experts say we might want to start getting used to it. With record drought having ravaged the corn crop, driving prices to record highs, the American agricultural industry finds itself divided.
Meat producers are pleading with Jackson, as well as their local members of Congress, to suspend or reduce the ethanol mandate. Meanwhile, out at the Chesterfield headquarters of the National Corn Growers Association, president Garry Niemeyer released a statement Thursday that said, in effect, let’s not be hasty.
Niemeyer said his association would support a “temporary, partial waiver” if it can be shown that the renewable fuel standard “is causing severe economic harm in light of the drought.”
It went on to say “An open and free market approach is the best and most efficient solution to getting us past this crisis.”
Well, yes. But until this year, after Congress ended $6 billion a year in ethanol tax credits, the market wasn’t precisely free. And whatever the environmental and national security benefits of renewable fuels, a mandate ordering their use also distorts the free market.
Jackson should waive or reduce next year’s mandate. That’s not a tough decision. Corn growers will not lack for markets for whatever part of their crop they can manage to salvage.
Indeed, a study released last week by two Purdue University agricultural economists said it’s not a sure thing that waiving the mandate would force ethanol prices down. If petroleum prices remain high, oil companies may choose to continue using ethanol at current levels, the study said.
The tougher questions concern global income distribution, population growth and climate change. According to the Organization for Economic Cooperation and Development, over the next eight years, the world’s advanced economies (the nations represented by the OEDC) will turn 14 percent of the world’s corn, 16 percent of its vegetable oil and 34 percent of its sugarcane into fuels for cars and trucks.
Meanwhile, millions of people will die for lack of food, many of them in the drought-plagued nations of the Sahel, or sub-Saharan Africa, where yet another food crisis is underway.
Americans who don’t care about hunger, poverty and income inequality at home are not likely to care about it in, say, Burkina Faso. But a nation that puts 80 percent of its corn into cars and animals should not be surprised if a reckoning comes.
