Ethanol Lobbyist Admits Subsidies Designed to Raise Corn Prices

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Rep. Cory Gardner (R., Colo.) asked President of the Renewable Fuels Association Bob Dinneen to respond to charges that the EPA's Renewable Fuel Standard (RFS) ethanol mandates have increased farming feed and operating costs Tuesday in an Energy & Commerce hearing.

Dinneen dodged the issue of feed and operating costs, stating the RFS was designed to increase corn prices such that Congress would no longer have to subsidize farmers to not grow corn.

The Renewable Fuels Association president also fiercely denied that the increase in corn prices has led to higher food costs for consumers, despite significant evidence to the contrary.

Peter Suderman of Reason.com reports:

There’s very little question about whether or not ethanol subsidies and related mandates, which essentially pay farmers to grow fuel instead of food, drive up the price of food. Ethanol policy hits corn directly, but because corn is so integral to the rest of the food production process, a rise in the price of corn quickly results in a rise in the price of other farm commodities such as meat, poultry, dairy, and soy products. When the Congressional Budget Office looked at the impact of ethanol subsidies on overall food prices between April 2007 and April 2008, the nonpartisan scorekeeper found that 10-15 percent of the 5.1 percent rise in food prices, as measured by the Consumer Price Index, could be attributed to ethanol subsidies.

The CBO noted at the time that it was difficult to precisely estimate the impact of ethanol subsidies going forward. But in early 2011, corn prices spiked after a crop shortage, which many analysts expected to translate into higher food prices. And over the years, ethanol subsidies, along with a renewable fuel standard which pushes energy producers to include ethanol in their products, has resulted in what the Farm Foundation describes as a "persistent demand shock." Some 40 percent of the nation’s annual corn crop is now redirected into ethanol production.