Call it the perfect storm.
We are still caught up in the worst drought cycle since the 1950’s.
Farmers are seeing one of the worst crops in decades. Soybeans and corn are hit particularly hard.
That alone would be enough to raise food prices, but roughly 40% of America’s corn harvest doesn’t go on your plate.
It goes in your gas tank.
A federal law mandates that we increase the use of bio-fuels by 20% by 2022.
The purpose is to lower our use of foreign oil. You mix it with gas, and you need less gas. And, it burns cleaner.
Think of it as a cleaner burning hamburger helper.
But if the helper costs more than the hamburger…does that make sense?
Ethanol, is essentially alcohol distilled from corn, yes, like corn liquor.
The blend in the US is usually from 10-15% ethanol, although you can find blends that are only 15% gas in some cities.
But the small corn harvest is causing prices to rise, and with nearly half the corn diverted, both grocery stores and gas stations are seeing price increases.
And the lack of corn for cattle feed means meat prices are going up as well.
The ethanol program has long been considered a political sop to corn producing states like Iowa and Ohio, but now, 25 Senators, 150 House members, and even the United Nations Food and Agricultural organization are asking the President to lift the ethanol mandate, at least temporarily to halt the rise in food prices.
And in other countries, ethanol is made from everything from straw to grasses. Basically, any plant that can be turned into biomass will work.
But there is no lobby for straw.