Ethanol and the Rise of Corn Prices

Now that Americans are becoming more environmentally aware we are trying to find alternative fuel sources. Biodiesel and Ethanol are a couple of fuel alternatives.

Ethanol is not a new product to us it used to be a big product in the 1850's. In fact Henry Ford used it to run his Model T. He used a mixture of alcohol and gasoline. There was only one problem, when prohibition occurred the use of alcohol was not allowed. Once the prohibition had ended in the 1930's ethanol was back. The use of Ethanol increased during WWII when there was a fuel shortage. If ethanol has been around this long, why are we just starting to use it more now? I would think that since it is a renewable resource we would have been using it already.

With the peak in interest of ethanol what is going to happen to our prices of chicken and corn. How will it effect other food prices?

Ethanol is made from corn, potatoes, and other products. It is made from the sugars and it is formed into a colorless alcohol fuel. These starches are formed into sugar which are then fermented into alcohol. Crops that are mainly sugar based work the best for ethanol production. The more popular ethanol becomes the more highly demanded corn will end up.

There will be a big snowball affect with the rise of corn prices. It will directly affect food prices. Not just corn, but chickens and cows. Both these animals feed off of corn based meals. They are raised on corn. When the farmers need to pay more for corn they are going to pass the price increase on to the consumers.

As the demand for corn increases we need to look at what other crops we produce the least and switch that land and make it available for corn production. I had heard on a podcast that Americans were thinking of outsourcing our cotton to other countries such as Vietnam in order to make more room for corn growth. Vietnam already grows cotton and has land available that is the perfect climate for this product.

If Vietnam grew all the cotton we needed and we were able to grow more corn it would remove a little tension between farmers and ethanol producers. We do need to figure something out because if we do not address the problem now it will become a bigger problem in the near future.