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Thread: Unintended Consequences of ethanol

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    Default Unintended Consequences of 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."

    "Ethanol demand has helped send corn prices soaring.
    And economist Babcock says the mere fact that ethanol comprises about 8 percent of fuel consumed in the United States has already changed the ebb and flow of the commodity market behind food.
    "We've now hitched the price of corn, inextricably linked the price of corn, to the price of crude oil, and I think we can't turn the clock back, that's the way it is."
    With corn prices more closely tied to oil prices, when the price of gas goes up, it raises the demand for ethanol — and that means consumers will feel it in two places: at the gas pump and on the dinner table."

    http://www.npr.org/2010/12/22/132082...-blame-ethanol

    Considering the fact next year will be rough for inflation and the economy as a whole, this article struck me with great interest.

    I do believe oil will start to rise again next year as the dollar is further weakened. But with it will come greater consequences then before.

    Sometimes it feels like we have linked all the cards together. So when the house of cards fall every last one will fall at the same time.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Unintended Consequences of ethanol

    Aren’t we fortunate we have a benevolent government looking out for our welfare?

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    Default Re: Unintended Consequences of ethanol

    A pantry is like a savings account for your tummy.

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    Default Re: Unintended Consequences of ethanol

    I'm very glad that you posted this thread first !!!

    Indeed, as time goes by, the ethanol mandate and ethanol subsidies continue to be proven of very little actual value ( except to corn farmers and ethanol refiners who depend on taxpayer money for their subsidized profits ), of arguably zero environmental value, and inarguably responsible for increasing both food and gasoline prices. I did notice that ethanol subsidies got extended as part of the recent 'Bush Tax Cut' extension law.

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    Default Re: Unintended Consequences of ethanol

    I think alot of "global warming" preventative measures are just for profits. Ie Carbon tax and credits. They sound good but long term produce little impact on the enviroment. They raise prices on goods and put small business at a disadvantage.

    Not to mention the rabid carbon credit trading fraud in Europe.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Unintended Consequences of ethanol

    ^^^ this issue has been discussed in many past threads ... i.e. that in the absence of uniform global regulations re 'global warming' countermeasures, the imposition of said countermeasures ( like the carbon tax, but also lesser measures that increase regulatory environmental compliance costs ) merely serves to provide a strong incentive for the 'global warming' polluters to relocate their facilities to other countries that don't enforce a carbon tax or high environmental compliance costs. The net result is typically much higher profits for the senior management and stockholders of these companies, high profits for the middle-men responsible for carbon credits trading and environmetal compliance hardware / enforcement, but higher 'domestic' prices and fewer 'domestic' jobs in those countries that do enforce carbon cap and trade and strict environmental regulations. The other end result is that, while it may not be visible 'domestically', the total amount of carbon / pollution emitted as a result of the relocation of facilities to other countries with 'lax' standards and low costs is just as large - if not actually larger ( due to the 'lax' regulations ) - than the former amount of carbon / pollution emitted 'domestically' before those facilities relocated !

    Or put bluntly, as you correctly implied, ethanol and other subsidized 'green' industries provide major benefits for the 'rich' - both management and investors - but provide 'negative' benefits for the 'domestic' middle class, who primarily see higher 'domestic' prices, fewer 'domestic' jobs, yet no reduction in carbon / pollution on a global level.

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    Default Re: Unintended Consequences of ethanol

    some new commentary on the economic realities of ethanol ... of gasoline prices ... and of obvious and notable differences in mainstream media reactions ...


    (snip)"Five dollars per gallon of gas by 2012! A former president of Shell Oil considers this likely. The average price on Christmas Day for a gallon of regular gas reached $3.28 in Los Angeles County, the highest price since October 2008. In one month, the price rose 13 cents, up 35 cents year to year.

    Where are the calls to sic Obama's Justice Department on Big Oil to hold the oil companies accountable for "market manipulation"? Why aren't we hunting down the amoral "oil speculators" responsible for repealing the law of supply-and-demand in order to line their pockets?

    During President George W. Bush's administration, we constantly heard demands to hold the President accountable for "Big Oil's price gouging." House Speaker Nancy Pelosi, D-Calif., just two years ago, knew exactly whom to blame for "skyrocketing" oil prices: "The price of oil is at the doorstep; $4-plus per gallon for oil is attributed to two oilmen in the White House and their protectors in the United States Senate."

    In 2007, when the average national price ranged from $2.17 to $3.22, then-Sen. Barack Obama demanded that the Federal Trade Commission investigate Big Oil for "price manipulation." In 2008, presidential candidate Obama urged the Justice Department "to open an investigation into whether energy traders have been engaged in illegal activities that have helped drive up the price of oil and food."

    Obama also called for "a windfall profits penalty on oil selling at or over $80 per barrel." As of Christmas 2010, a barrel of oil sold at slightly above $90. What happened to the windfall profits tax?

    Yes, back then the average price per gallon was four bucks. But blaming "oilman" Bush for high prices began when the average price was well below today's $3.05 national average.

    The average price was $1.72 on March 5, 2003, when CBS News posted a story online with this headline: "Dems Blame Bush For High Oil Prices." It referred to an investigative report by Sen. Carl Levin, D-Mich. Levin blamed Bush's post-9/11 decision to increase the amount of oil in the Strategic Petroleum Reserve by 40 million barrels in 2002 -- bringing the total to 600 million. Levin said, "We're confident this had a significant impact on the price of oil in 2002." Never mind that the Bush administration called the amount of oil diverted too small to matter.

    The average price was $2.80 on April 22, 2006, when USAToday.com posted an article with the headline "Democrats blame Bush for high gas prices": "Consumer gasoline prices continue to soar as the Bush administration places too much emphasis on drilling reserves and not enough on alternative fuels, Democrats said." The article quoted Sen. Bill Nelson, D-Fla., who praised Brazil's "energy independence." "In Brazil," Nelson said, "drivers are filling up their cars with ethanol instead of gasoline."

    Not exactly, Sen. Nelson.

    Brazil may be "energy independent" in that it imports only a small percentage -- 649,000 barrels per day in 2009 -- of the oil it consumes. But that makes Brazil the 19th-highest oil-importing country in the world. Its economy relies heavily on oil that is domestically produced and consumed. Brazil is the seventh-largest consumer of oil in the world and the ninth-largest producer. Its famous -- and heavily government-subsidized -- sugar cane-based ethanol fuel is actually a blend that uses approximately 75 percent gasoline.

    As for U.S. ethanol, which is made from corn, Nobel laureate environmentalist Al Gore recently called it a bad deal: "It is not a good policy to have these massive subsidies for first-generation ethanol. First-generation ethanol, I think, was a mistake. The energy conversion ratios are at best very small. ... The size, the percentage of corn particularly, which is now being (used for) first-generation ethanol definitely has an impact on food prices. The competition with food prices is real." Why did he once support ethanol? He admitted that he'd wanted to help farmers in Iowa, site of the nation's first caucus, since he "was about to run for president."

    The silence over the recent price run-up is yet the latest example of left-wing hypocrisy. It was always about bludgeoning Bush rather than a sincere conviction that Big Oil was cheating. How else to explain the absence of demands for investigations?

    America could achieve "energy independence" if producers were allowed to drill in Alaska, the lower 48 and offshore, where substantial amounts of untapped oil remain off-limits. Obama, who currently squanders hundreds of billions of taxpayer dollars by "investing" in alternative energy, possesses no more control over the law of supply-and-demand than did "evil" Oilman Bush."(snip)

    from

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    Default Re: Unintended Consequences of ethanol

    Has anyone looked at grain prices lately ? The Midwestern drought combined with diversion of 40 % of our corn crop into our gas tanks will play havoc with food prices WORLDWIDE later this year and well into next.

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    Default Re: Unintended Consequences of ethanol

    ^^^ If you can't beat em, join em ... I'm smiling today !!!





    One person's higher grocery bill is another person's 50% investment profit within 3 months !!!

    Hopefully a few Dollar Den readers read and didn't take the position that the author was a 'gloom and doom' crackpot.


    I would also comment that rapidly rising grain prices is now resulting in lots of cattle farmers / ranchers deciding to butcher their livestock now rather than having to pay astronomical feed bills through the winter. This should logically result in stable or even slightly falling prices for beef, pork, chicken etc. in the short term. However, this will in turn be followed by MUCH higher beef, pork, chicken etc. prices next year as the reduced remaining supply meets steady or growing demand.
    Last edited by Melonie; 07-30-2012 at 01:30 PM.

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    Default Re: Unintended Consequences of ethanol

    Lol.... Good call.
    The country has been looted.

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    Default Re: Unintended Consequences of ethanol

    Quote Originally Posted by Vamp View Post
    "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 subsidies were stopped at the beginning of the year.

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    Default Re: Unintended Consequences of ethanol

    "As the Congressional Budget Office wrote back in 2010, "In the future, the scheduled increase in mandated volumes would require biofuels to be produced in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included." [Italics mine.] In other words, the mandates have grown so large that the tax credits barely made a difference anymore. Demand for ethanol is driven by the mandates, not by the tax credit. When you take away the tax credit, nothing happens: Demand stays high because the law says so, corn prices go up accordingly, and corn farmers stay rich. The subsidies were a nice little fillip on top of that, but at this point it's basically chump change.

    So there you have it. The fairy tale version of the story was nice, but it turns out that ethanol subsidies didn't go away after all. That's true both literally (most of the subsidy money was redirected to other, smaller-bore ethanol initiatives) and in the bigger picture, where mandates provide the same benefit without being quite so obvious about it. Corn farmers have learned what so many other special interests before them have learned: A nice, quiet subsidy is always better and safer than a garish, noisy one. Now that's what they have."

    http://www.motherjones.com/kevin-dru...-little-better

    I disagree that it is the corn farmers that get rich off this game. It is the commodities traders that get rich and industrial farmers.

    But the corn prices are high now because of the drought and high temps in the midwest. Soybeans are also up 20%.

    Today the question is will gas go up in price because of the corn price increase? Groceries will be going up without a doubt.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Unintended Consequences of ethanol

    This is only the tip of the iceberg. Just wait for the food riots in Egypt and elsewhere as world grain prices hit the roof.

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    Default Re: Unintended Consequences of ethanol

    ^^^ actually, the 'west' will have to wait for the secondary effects to take root before personally experiencing a huge economic impact ... higher corn / corn syrup costs finally pushing up prices of 'processed' foods, higher beef / pork / chicken costs finally pushing up prices at fast food joints etc.

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    Default Re: Unintended Consequences of ethanol

    Quote Originally Posted by Eric Stoner View Post
    This is only the tip of the iceberg. Just wait for the food riots in Egypt and elsewhere as world grain prices hit the roof.
    We saw that with rioting in Mexico City when corn was diverted to ethanol production years ago. The solution then to keep the lid on the simmering pot was to put the strategic grain reserve onto the market.

    The strategic grain reserve is supposed to get us through a crisis like a drought or blight, so that there is not a major inflation of food costs.

    The silos are empty.

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    Default Re: Unintended Consequences of ethanol

    ^^^ China's government silos aren't yet empty ... they're now 'selling' corn and rice at below world market prices to try and keep Tiannamin square from repeating. See the relevant thread.

    Also, the United Nations has just made an official request to the US government to drop their ethanol mandate. See . Odd that there's lots of coverage on this subject to be found in the international press, but very little via US mainstream media.

    (snip)"The United Nations (UN) food agency has called on the United States to suspend its production of biofuel ethanol. Under US law, 40% of the corn harvest must be used to make biofuel, a quota which the UN says could contribute to a food crisis around the world. A drought and heatwave across the US has destroyed much of the country’s corn crop, driving up prices. The US argues that producing much of its own fuel, rather than importing it, is good for the country.—BBC News, 10 August 2012"(snip)

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    Default Re: Unintended Consequences of ethanol

    It is ridiculous for the U.S. to use 40 % of its corn crop for ethanol. We can and should use sugar cane.
    Are we still restricting ethanol imports ?
    Imagine if Haiti , Jamaica and Africa grew more sugar cane and used it to produce ehtanol. What a "win-win" that would be for them and us.

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    Default Re: Unintended Consequences of ethanol

    ^^^ I think that the tariffs and quotas on imported sugar cane based ethanol expired at the beginning of this year. However, the 40% US corn to ethanol mandate remains in force. So this effectively removes previous prohibitions on sugar cane ethanol at the border, but continues prohibitions against gasoline refiners purchasing imported sugar cane ethanol until the 40% US corn ethanol consumption requirement has first been met. Also worth noting is the fact that US corn ethanol is priced somewhere around $1 per gallon higher than Brazilian sugar cane ethanol ... meaning that the 40% US corn ethanol mandate is still costing every American 10 cents extra per gallon at the gas pump ( based on 10% blend ). Actually, the price premium for US corn ethanol may be even higher than $1 per gallon now, given the recent increases in corn prices.

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    Default Re: Unintended Consequences of ethanol

    Our food is saturated with corn. (Read the ingredients on the label, corn sweeteners are in everything from ketchup to cereal...) Politicians stay in office by bringing tax dollars to their states, there are only so many construction projects that can be done in the Midwest corn states. (Nothing on the scale of Boston's 'Big Dig' or rebuilding NYC, at least...) So they subsidized corn production, then had to find ways to use it... Voila burn it as a fuel! Now they want relief subsidies due to the drought. Gotta love big government...

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    Default Re: Unintended Consequences of ethanol

    Quote Originally Posted by Eric Stoner View Post
    It is ridiculous for the U.S. to use 40 % of its corn crop for ethanol. We can and should use sugar cane.
    It is stupid. Especially as we could be converting coal into liquid fuel as Germany did in the closing days of WW2. We should be getting off of gasoline and building long ranged hybrid electric diesels. Fortunately Trains are seeing a resurgence with the cost of diesel. OTR Trucking should be killed off and a return to delivery trucks from the rail yard. Some locations are lucky such as Cheyenne, or Pueblo, or Omaha that have the large rail yards from before highways and trucking.

    Unfortunately sugar cane doesn't grow at our latitudes. Probably get in one crop for late summer, if lucky. If I am not mistaken it is a very thirsty plant too.

    Quote Originally Posted by Eric Stoner View Post
    Are we still restricting ethanol imports ?
    Yes, Congresscritters have to protect their districts. The will burn down the Nation to save a couple of Counties.

    Quote Originally Posted by Eric Stoner View Post
    Imagine if Haiti , Jamaica and Africa grew more sugar cane and used it to produce ehtanol. What a "win-win" that would be for them and us.
    That sort of intensive 3 season agriculture has to be supported by a robust petrochemical or nuclear power infrastructure to produce the ammonium nitrate required.

    Some could if their petrochemical industry could, and they could get past Tribal rivalries. So Haiti and Jamaica are out unless they can build nuclear power plants, as they do not have the oil.

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    Default Re: Unintended Consequences of ethanol

    More than Corn I am concerned about Soybeans. You as pervasive as Corn and Corn syrup is to our everyday lives Soybeans are probably more so.

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    Default Re: Unintended Consequences of ethanol

    Quote Originally Posted by ArmySGT. View Post
    It is stupid. Especially as we could be converting coal into liquid fuel as Germany did in the closing days of WW2. We should be getting off of gasoline and building long ranged hybrid electric diesels. Fortunately Trains are seeing a resurgence with the cost of diesel. OTR Trucking should be killed off and a return to delivery trucks from the rail yard. Some locations are lucky such as Cheyenne, or Pueblo, or Omaha that have the large rail yards from before highways and trucking.

    Unfortunately sugar cane doesn't grow at our latitudes. Probably get in one crop for late summer, if lucky. If I am not mistaken it is a very thirsty plant too.

    Yes, Congresscritters have to protect their districts. The will burn down the Nation to save a couple of Counties.

    That sort of intensive 3 season agriculture has to be supported by a robust petrochemical or nuclear power infrastructure to produce the ammonium nitrate required.

    Some could if their petrochemical industry could, and they could get past Tribal rivalries. So Haiti and Jamaica are out unless they can build nuclear power plants, as they do not have the oil.
    Actually we do grow some in Florida, Hawaii and Louisiana. We can also grow some in Mississippi, Alabama, Georgia, South Carolina and S.E. Texas. We could grow a lot more in Puerto Rico, the U.S.V.I. and on Guam. The former two places had booming sugar industries at one time. In Puerto Rico and in the Virgin Islands it was destroyed by cheaper imports from Cuba ( BEFORE Castro ). You are right that it needs a warm, wet climate. The places I listed do.

    While modern fertilizers would be optimal, sugar cane is actually a fairly hardy crop and doesn't need a lot of feeding. Parts of West Africa would be ideal.So would Jamaica and Haiti.

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    Default Re: Unintended Consequences of ethanol

    ^^^ sarge, you have half the 'external energy' picture correct. First huge energy requirement is to produce nitrogen based fertilizer to productively grow corn / sugar cane / whatever. But second huge energy requirement is distillation of the corn / sugar cane / whatever based 'sour mash' to extract pure ethanol. Some US ethanol refineries are already closing due to the rising local cost of electricity / natural gas based distillation energy ( pacific ). Another US ethanol refinery attempted to use coal for distillation energy, but was denied a stack permit.

    The external energy costs are almost as large of a reason that US ethanol must be priced > $1 per gallon higher than imported ethanol as is the relative cost of corn versus sugar cane. And foreign countries with access to low cost nuclear or coal fired electricity / coal itself are in a position to price imported ethanol at levels well below the actual US cost of production. But this would create the usual 'irony' ... that US efforts to clean up exhaust gases via burning ethanol blend versus 100% gasoline only serves to 'export' pollution to a foreign country. At the moment the 40% corn ethanol mandate prevents this from happening ... while saddling Americans with a 'stealth' 10 cent per gallon price premium on 10% blended gasoline.

    Throw in the double irony that US gasoline production has risen, and US gasoline consumption has dropped ( in addition to the 10% automatic drop resulting from 10% ethanol blend mandates ), to the point where the US is now EXPORTING refined gasoline to foreign countries at ~$3 per gallon while consuming ~$4 per gallon US corn ethanol in its place !
    Last edited by Melonie; 08-15-2012 at 01:52 PM.

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    Default Re: Unintended Consequences of ethanol

    Quote Originally Posted by Eric Stoner View Post
    Actually we do grow some in Florida, Hawaii and Louisiana. We can also grow some in Mississippi, Alabama, Georgia, South Carolina and S.E. Texas. We could grow a lot more in Puerto Rico, the U.S.V.I. and on Guam. The former two places had booming sugar industries at one time. In Puerto Rico and in the Virgin Islands it was destroyed by cheaper imports from Cuba ( BEFORE Castro ). You are right that it needs a warm, wet climate. The places I listed do.
    If they all switched over to sugar cane, what doesn't get produced? What other food comes off the table, so the sugar can go into the gas tank. While those locations can, only those external of the continental United States can produce more than one crop a year. Adding transportation to the losses in the conversion.

    Quote Originally Posted by Eric Stoner View Post
    While modern fertilizers would be optimal, sugar cane is actually a fairly hardy crop and doesn't need a lot of feeding. Parts of West Africa would be ideal.So would Jamaica and Haiti.
    No, I meant thirsty, as in the sugar cane requires a lot more water than other cultivated crops for growth. Not really a problem in the tropics. Stateside that would be pulling too much water from aquifers that our ridiculous urban sprawl requires for lawns, golf courses, and manicured parks.

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    Default Re: Unintended Consequences of ethanol

    It's simply amazing how new 'material' comes out of the woodwork at timely moments ... you can't make this stuff up, folks ...

    from


    (snip)Campaigning in Missouri Valley, Iowa, yesterday, President Obama announced yet another government spending program -- this time designed to inflate meat prices in Midwest swing states. "Today the Department of Agriculture announced that it will buy up to $100 million worth of pork products, $50 million worth of chicken, and $20 million worth of lamb and farm-raised catfish," Obama explained to reporters in front of a drought-stricken cornfield.(snip)

    (snip)A drought is currently driving down corn production. The shortage of feed is forcing livestock producers to slaughter animals early, putting downward pressure on meat prices in the short run and guaranteeing shortages and higher prices next year. But nature is not the biggest factor in this crisis -- the government is. Specifically, the federal government's ethanol mandate, which requires that 13.2 billion gallons of corn-based ethanol be produced in 2012.

    Thanks to the ethanol mandate, more than 40 percent of the nation's corn crop now goes into the production of a useless fuel that hardly anyone would buy if the government didn't require it. That's up from just 17 percent in 2005, before the mandate went into effect. Only 36 percent of the corn crop now goes for feed, and 24 percent goes for food.

    Obama could solve this problem instantly by suspending the federal ethanol mandate -- something his EPA actually can do unilaterally and legally. Instead, Obama will buy up meat -- a move that meat producers say won't help them much anyway. "It doesn't solve the problem of having enough affordable corn next summer," industry analyst Steve Meyer told Reuters. "Without changing the ethanol program, nothing can be done," he said.

    The higher corn prices caused by the mandate and the drought have also driven up the price of ethanol by 33 percent since May, which means -- again, thanks to the mandate -- higher gas prices at the pump. Nationally, the average price of a gallon of gas rose 16 cents in July, an all-time record hike for that month. Prices rose an additional eight cents just last week. Gas is already more than four dollars a gallon in California and is expected to go higher.

    Hailing from the corn-producing state of Illinois, Obama has always been a supporter of special government benefits for ethanol producers. But even environmentalists rejected ethanol long ago, when scientists established that it actually increases carbon and smog emissions.

    To recap, government is driving up the cost of food, animal feed and gasoline, and Obama's solution is to drive up meat prices as well. Obama could eliminate the entire problem overnight and reduce carbon emissions were he to waive the ethanol mandate in a time of drought. Instead, he is creating a new spending program to mollify livestock producers, who, were it not for the ethanol mandate, would be able to make an honest living without his help.(snip)

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