Checked the price of hamburger at the grocery store lately? Whoa!
Beef prices have been soaring, along with the cost of dairy, fruits and vegetables. Drought in California and elsewhere accounts for some of the rise. Strong demand for U.S. food from abroad accounts for some too. Not much consumers can do about that, other than applaud an agricultural export economy that creates so many American jobs.
For one big factor behind the high price of food, though, you can blame Uncle Sam.
Americans pay a premium for beef in part because of misguided energy and farm policy. Under federal rules, oil refiners are required to blend a huge amount of ethanol into the nation’s gasoline supply. Most of that ethanol is being produced from corn that otherwise would be available for breakfast cereal, sweeteners and edible oils, as well as for animal feed.
Nearly 40 percent of the U.S. corn crop is diverted to the gas tank, by government decree. Cattle, in particular, require large amounts of grain in their diets to grow from calves to market weight. Under pressure from high feed costs over the years, cattle producers who must compete for grain with ethanol makers have cut back their herds. With livestock supply down, and ranchers’ production costs so stubbornly high, you’ll pay more money to slap a steak on the grill.
Last year, the government took a baby step toward reducing the impact of its ethanol policy on food prices. For the first time, the Environmental Protection Agency proposed taking a break from the relentless annual increases in its Renewable Fuel Standard.
The RFS, as it’s called, dictates the amount of ethanol that must be blended into the nation’s fuel supply. Congress approved it largely as a means to encourage commercial production of ethanol from inedible ingredients such as grass or wood chips. Nearly a decade after being enacted, the policy has failed miserably. Most ethanol being produced in the U.S. still comes from corn.
The renewable fuel industry’s other arguments in favor of the RFS likewise fall flat. For instance, ethanol production has done almost nothing to reduce America’s dependence on foreign oil. The boom in domestic oil production from a new extraction technique known as fracking has done that job nicely, overshadowing any benefits from biofuels. Nevertheless, the government’s RFS mandate has been scheduled to keep going up, transferring wealth from American consumers to politically favored ethanol producers and corn growers.
The EPA’s current, first-ever proposal to lower the RFS is modest: The amount of renewable fuel being required would inch down from 16.55 billion gallons in 2013 to 15.21 billion in 2014. Still, the crop-farming and renewable-fuel lobbyists are ramping up pressure on the EPA to reverse itself. They want you buying corn-based ethanol.
Anyone planning to fire up the grill this summer should be outraged at the prospect of an EPA flip-flop on this issue, but it may yet happen in the weeks ahead.
Meantime, uncertainty about EPA ethanol policy has left the motor-fuel industry hanging. By making it difficult for the industry to plan and budget effectively, that uncertainty raises costs for oil refiners, and, ultimately, for motorists, as the U.S. Government Accountability Office highlighted in a recent study.
No way should the EPA let vested interests in the corn and ethanol businesses prevent it from mitigating the impact of a bad policy. The agency should stand by the cut it has proposed, and keep cutting more, until the RFS is eliminated altogether.