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December 7, 2007
Ethanol Subsidies Fuel Food Prices
The Economist offers an extensive analysis of how U.S. subsidies for ethanol, along with rising Asian standards of living, are pushing your food prices upward:
. . . the demands of America's ethanol programme alone account for over half the world's unmet need for cereals. Without that programme, food prices would not be rising anything like as quickly as they have been. According to the World Bank, the grain needed to fill up an SUV would feed a person for a year.
America's ethanol programme is a product of government subsidies. There are more than 200 different kinds, as well as a 54 cents-a-gallon tariff on imported ethanol. That keeps out greener Brazilian ethanol, which is made from sugar rather than maize. Federal subsidies alone cost $7 billion a year (equal to around $1.90 a gallon).
The article goes on to note that net farm income in the United States will be about $87 billion this year, 50% higher than the average of the past ten years.
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