US. Ethanol mandates leave food industry vulnerable

12.09.2016

Sir, Gregory Meyer’s article “US food versus fuel: a debate losing its rage” (September 6) suggests that higher yields and “beneficial weather” have enabled the market to absorb the increased demand for corn brought about by US ethanol mandates. In other words, the impact of mandates on the food industry is negligible.

I beg to differ. Such mandates leave the food industry and feedstock vulnerable to a range of factors that can cause prices to fluctuate. When beneficial weather gives way to drought or flood, and government mandates remain, competition for shrinking corn supplies will make prices volatile, an effect that will reverberate across the food supply chain — not for consumers alone. Price volatility is actually most challenging for companies that purchase corn for animal feed.

Mr Meyer also fails to mention that expanded US plantings of biofuel feedstock come at the expense of diverse food crops. Since the US’s ethanol mandates were first enacted in 2005, the area planted with corn and soy (also a common biofuel feedstock) has expanded by 16.8m acres, while the total acreage of all other crops — a radical transformation of agriculture with trade and pricing implications for a range of commodities.

Mr Meyer also excludes the other costs of a flawed mandate. As farmers dedicate more acreage to fertiliser-intensive corn for biofuels, farmland runoff is leading to high levels of nitrogen in waterways.

In Iowa — the heart of the US corn and ethanol industries — removing high levels of nitrates from drinking water costs Des Moines Water Works, the capital city’s utility, $1.5m to ensure safe drinking in 2015. Those nitrates flow downstream from farms exempt from federal water regulations.

Further downstream, in the Gulf of Mexico, the nitrogen from farmland runoff creates a colossal “dead zone” unable to support marine life that is costing the US seafood and tourism industries an estimated $82m a year.

The impacts of US ethanol mandates on the food supply chain are extremely complex, and must be acknowledged as such. Congress should advance solutions that prioritise market realities and put an end to the unintended, under-reported consequences of ethanol mandates.


 The Financial Times

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