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Depressed U.S. corn prices suggest that ethanol production is not causing a shortage of the grain

Corn-based ethanol production continues to rise; U.S. farmers planted 87 million acres of corn this year—two million more than the U.S. Department of Agriculture (USDA) had initially estimated in March.  This news has driven down corn market prices, leaving farmers skeptical about the theory that ethanol production has caused a corn shortage and in turn inflated food prices in the U.S.

The U.S. is the world's largest producer of both corn and ethanol, surpassing Brazil in the latter category in 2006.  Since 2002, the year ethanol production began rapidly increasing in the U.S., the rate at which food prices increase has doubled (an increase of $46 per week for a family of four from 2002 to 2009, compared with an increase of $23 per week for the same family over the prior seven-year period).  These simultaneous increases in food costs and ethanol production have left many people concerned over a potential shortage of the grain. The current market prices, however, undermines the correlation between ethanol production and a shortage of the grain.  

Still, many challenges remain regarding the practicality and desirability of corn-based ethanol production.  Increased fertilizer use to grow more corn may elevate levels of ground water contamination.  Not enough machinery exists to harvest all the available corn biomass, not just the kernels.  And the U.S. Environmental Protection Agency (EPA) estimates that ethanol is four percent shy of the Energy Independence and Security Act requirement that the energy source reduce greenhouse gases by 20 percent compared with the level of greenhouse gases that would have been emitted without the technology.

Image of farmers harvetsing corn by creischl via iStockphoto


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