Courtesy of Mish.
The price of corn is at all all-time high because of extreme drought conditions in the US coupled with the hottest July temperatures since records began 117 years ago.
Inane Policies
US policy mandates production of ethanol for blending in gasoline. That ethanol comes mostly from corn.
Diverting corn crops to inefficient ethanol production has members of the Group of 20 leading economies – including France, India and China – concerned about the US ethanol policy.
In response, the UN urges US to cut ethanol production
The US is poised to divert around 40 per cent of its corn into ethanol because of the Congress-enacted mandate despite “huge damage” to the crop because of the worst drought in at least half a century, José Graziano da Silva, director-general of the UN’s Food and Agriculture Organisation, warned.
“An immediate, temporary suspension of that [ethanol] mandate would give some respite to the market and allow more of the crop to be channelled towards food and feed uses,” he wrote in an opinion piece in the Financial Times.
Tom Vilsack, US agriculture secretary, raised doubts about the impact of waiving the ethanol mandate, arguing that the US biofuel industry had reduced petrol prices and created jobs.
Economic Dimwit or Shill?
The question at hand is whether the US agriculture secretary is an economic dimwit, a shill for the Obama administration, a shill for corn producers, or some combination thereof.
The US biofuel industry certainly has not reduced the price of gasoline. Tariffs on imported ethanol have kept the price of ethanol artificially high (but they did expire in December).
Fundamentally, government policies do not create job, they cost jobs. The best way to create jobs is for government to get the hell out of the way and let the free market work….
