Quite a number of perspectives here this morning. I'll add mine, for no particular reason. I come from corn farming country in Iowa. But our tiny farm was on the corn-buying end of things, rather than the corn-selling end of things. Prior to the RFS, I paid $1.80 per bushel for corn. The year that RFS was introduced, the price doubled to $3.6o. Within a few years it headed up quite a bit before peaking between $8 and $9. I am no longer in the business of buying corn, and this is a big reason why. Several other family members are either out of the business or have come close. Several factors fed into the rising price, but RFS is a piece of the puzzle. Corn has since returned to lower price levels, but not to where it was before. This morning it looks like spot price (not retail) is at $3.51. It's nice to see it down again, if you're on the buying end of things. Perhaps not, if you're in Martin's shoes.
This is an illustration of what happens when markets are forced by outside intervention. Volitility. We might be able to grow enough corn to supply a significant portion of our fuel need. As an Iowan, It does seem kinda neat that Iowa could actually produce some of its fuel for once, rather than importing all of it from the oil-producing states & nations. I have no problem with Ethanol's use or production*. But suddenly forcing ethanol into the market place sent shockwaves through the price of corn, which has roiled several corn-buying industries. To add insult to injury, the gov't then took my tax dollars to subsidize the production of a commodity that wasn't even cost competitive. It's still not cost competitive 10 years later. If the gov't had simply stepped back and let demand grow naturally, we'd have less ethanol today (it would still be around), but we also would have a generation of farmers that had a decade of good sleep instead of fretfully closing up shop one-by-one. And, in all likelihood, I would still be buying corn, instead of trying to talk myself back into an industry that was fun but not very economic.
So I wanted to point out that there is a big picture here, and it is always dicey when the gov't decides to change the big picture. There is always a loser when the gov't decides to favor some new industry, and it's important to make sure that the economy is actually better off (overall) when winners and losers are chosen. This time a lot of losers were in the food industry, which is a fairly important industry in this country. Like most folks, I fill my tummy more often than I fill the gas tank.
So sacrificing one important area for what probably amounts to a slightly less important area doesn't seem like a particularly wonderful idea in the first place, even if it hadn't been done abruptly. And the way it was implemented has definitely eliminated me from the fan club.
* Side note: I do find it offensive how hard the gov't pushes folks to believe that Ethanol is equivalent to gasoline. Ethanol and gasoline are not equivalent. They do not behave identically, and the energy content per gallon is significantly different. Pricing the gallons similarly and then hoping people don't notice is like selling artificially-flavored diet orange soda for the same cost as freshly-squeezed full-pulp organic hippy orange juice. The products aren't the same, and it's just not honest to pretend that they are.
* Side note 2: I also find it highly annoying that the mandate has made it quite hard to find uncontaminated gasoline. Even Iowa sells E10 by default now (for years Iowa was a huge producer of Ethanol but not a huge consumer). Although it's still easier to find good gas in Iowa than in Wisconsin, and I can't remember ever finding clean gas in Upper Michigan. Let the fuels compete. If Ethanol can't hold its own in an open market place, why would we want to produce it? And what do we gain by forcing an uncompetitive fuel on an unwilling public? Seems like everyone is losing except the corn growers association.
