From NPR
Fuel Vs. Food: Ethanol Helps Boost Meat Prices
http://www.npr.org/templates/story/story.php?storyId=132136255
The U.S. corn crop is enormous. But about a third of it doesn't go to cereal or cows — instead, it helps run your car. To boost our use of renewable fuels, the federal government subsidizes corn-based ethanol.
This has the meat and dairy industries up in arms over the high cost of their main feed. The rise of ethanol has pitted livestock producers against the oil industry......
.......But let's get out of the kitchen for a minute — this is a story about corn. Because when you're eating meat, you're indirectly eating lots of corn. Far more corn goes into the meat you're eating than into a box of cornflakes.
.....When it comes to raising meat, eggs and dairy, feed is the biggest cost. And, most likely, that feed is corn.
For years, the livestock industry was the main buyer of cheap and plentiful corn. Then came the ethanol mandate in 2005. Ultimately, the government required that Americans use about 13 billion gallons of ethanol in 2010. And the way we make ethanol here? Yep, you know this one: corn.
To further boost using corn to fuel your car, Congress created subsidies paying gasoline blenders for every gallon they blend with ethanol.
Not surprisingly, since the ethanol mandate was enacted five years ago, the ethanol industry's corn consumption has tripled. Our cars now burn up a third of the nation's corn crop.
“I don't see why we can really justify subsidies, when all that does is raises cost of producing food,” says economics professor Bruce Babcock, of Iowa State University.
Ethanol policies increase the cost of food at least 1.5 percent, Babcock says. And the impact on meat prices is significantly greater.
It's economics 101, he says. Ethanol plants increase the demand for corn, driving up the prices for other buyers — like livestock producers. International demand is up, too – and we're exporting more ethanol than ever before. Many grain farmers are seeing record incomes this year.
What I'm looking at is that the price of corn has not gone up. In fact, adusted for inflation--
--corn's at the low end of its long term range. This is where the econ prof usually says "your goofy low-corn-price story may be all well and good in practice but in the cold hard world of theory it just falls apart."