The Car and Truck Fleet and Leasing Management Magazine

Support for Corn Ethanol Declining

May 05, 2008

WASHINGTON, D.C. --- The rising cost of food is prompting some legislators to reconsider their support for corn ethanol.

Two dozen Republican senators last week, including John McCain, asked the Environmental Protection Agency to ease requirements, mandated by 2007 legislation, to blend more ethanol and other renewable fuels into the U.S. gasoline supply, the Wall Street Journal reported.

"With the price of everyday meat, chicken, bread and eggs rapidly increasing, we are asking the EPA to use the flexibility that Congress gave them, because so many families cannot afford the increasing prices at the grocery store," Sen. Kay Bailey (R-Texas) told the Wall Street Journal.

In addition, higher food prices are hindering efforts to fight global poverty.

The Senate is now debating a major farming bill that would help shift the U.S. away from corn-based ethanol by reducing the 51 cents-a-gallon credit to 45 cents. Another provision in the bill would create a new $1.01-a-gallon credit for cellulosic ethanol, which is made from wood chips, switch grass and other nonfood stocks. Cellulosic ethanol is still in developmental stages and isn't yet available commercially.

However, ethanol subsidies still draw strong support from many legislators in farm states and from the White House. At a Congressional hearing last Thursday, U.S. Department of Agriculture chief economist Joseph Glauber said that corn ethanol's impact on food prices will likely subside over time. He did, however, acknowledge that retail food prices increased by 4 percent in 2007, the fastest since 1990, the Wall Street Journal reported.

Glauber, who addressed the Joint Economic Committee, said food prices were expected to grow another 4 to 4.5 percent in 2008, but that was also due to increases in wheat and rice prices that had nothing to do with ethanol subsidies. He pointed to greater high-quality food demand from countries like China and India.

On Friday, President Bush also reiterated his support for corn ethanol. "I'd much rather be paying our farmers when we go to the gas pump than paying some nation that may not like us," he said during a speech.



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