High Corn Prices Flattening the Poor
Deroy Murdock writes about ethanol in National Review Online today, specifically on the effect on food prices, as the Mexican tortilla crisis illustrates:
Existing federal laws that mandate ethanol in U.S. gasoline have diverted trainloads of corn from America’s food supply-chain to ethanol factories. This boosted U.S. corn prices nearly 80 percent in 2006.
That’s bad enough if you buy corn on the cob for a weekend barbecue. But it’s much worse if you are a poor Mexican surviving on corn tortillas. The price of a kilo (2.2 pounds) of tortillas recently has shot up 55 percent, from 5.5 to 8.5 pesos.
He also provides a good one-paragraph summary of the pork barrel politics of ethanol, worth passing on to any of your friends who want a quick read on the issue:
Uncle Sam gives ethanol manufacturers a 51-cent-per-gallon subsidy. Anyone who wants to import ethanol is welcome to — provided he pays the 54-cent-per-gallon tariff slapped on ethanol imports. This is one reason for another unintended consequence: gasoline prices shot up last summer since ethanol, largely produced in the Midwest, had to be shipped south and to both coasts to be blended, by law, with gasoline. Importing Brazilian ethanol into Atlantic and Pacific ports would have made sense, but then-House Speaker Dennis Hastert hated the idea, since that would put competitive pressure on his corn-farming Illinois constituents.