How the (Finally Ended) Corn Ethanol Subsidy Made Us Fatter

High Fructose corn syrupAmerica's food chain has lately produced a bumper crop of headline-ready catastrophes. From arsenic in apple juice to antibiotics in beef to E. coli-tainted lettuce, a trip to the friendly neighborhood grocery store can sometimes feel like a round of Russian roulette.

But the biggest threat -- the one that food experts agree is most responsible for America's health, economic, and dietary problems -- has just been neutralized: At the end of 2011, Congress allowed the much-vilified corn ethanol subsidy to expire.

Ethanol, a gasoline replacement and additive that could help reduce America's dependence upon foreign oil, has long been America's top recipient of alternative fuel funding. And since 1980, corn ethanol -- essentially, gas made from corn -- has been the biggest beneficiary of the biofuel craze. Over the past 30 years, the federal government has given an estimated $45 billion to the corn industry to help support ethanol production. In 2011 alone, those subsidies totaled about $6 billion, or about 45 cents for every gallon of ethanol.

Sweetner use dipsBrutalizing America's Waistlines ...

But the investment in generating more home-grown fuel has also generated a host of painful side effects. First, by driving down the cost of corn, the subsidy helped spur the wider use of America's most notorious sweetener: high fructose corn syrup.

Starting in the mid-1980s, as subsidy money trickled through the agricultural economy, farmers and food production companies discovered that, even when sale prices for corn were low, the government's largess meant it was still worthwhile to grow it -- lots of it. This meant that more was grown than could be consumed by people or livestock, but only so much of the excess could be made into fuel. Turns out, ethanol is hard on engines, so the standard blend of gas that goes into your tank is only 10% ethanol -- the rest is good old fossil fuel.

So what were corn producers supposed to do with the rest of that huge surplus?

Enter HFCS. Beginning in the late 1970s, the U.S. instituted tariffs that drove up the price of sugar. By coincidence, a few years later, the corn subsidy started driving down the price of corn. The combination suddenly made HFCS a great deal for food producers. Beginning in the mid-1980s, the sweetener started working its way into foods, and within a few years, it was showing up in thousands of products -- contributing thousands of empty calories a week to the average American diet.

Over the past few years, attacks on HFCS by nutritionists and food wonks like Michael Pollan have made consumers more wary of the additive. However, as HFCS usage has dropped, ethanol use has increased. In 2007, Congress mandated that the U.S. must consume 15 billion gallons of alternative fuels a year -- including ethanol -- by 2015; by 2022, annual usage must increase to 36 billion gallons. As ethanol production has ramped up, it has taken the price of HFCS with it, further reducing the sweetener's viability. The removal of the corn subsidy will likely make HFCS even more expensive -- and less attractive to food producers.

... And Mexico's Economy

At the same time that the corn subsidy was expanding America's waistlines, it was also devastating Mexico's rural economy. Because of the subsidy, U.S. farmers were able to sell corn for less money than it cost them to grow it. When the North American Free Trade Agreement was passed in 1994, it opened Mexico's borders to a tidal wave of cheap American corn. Since then, an estimated 2 million Mexican farm jobs have disappeared as unsubsidized Mexican corn has been priced out of existence. Today, farming in Mexico is a shadow of its former self, and millions of would-be agriculture workers have departed for sunnier pastures -- usually in the United States.

bio fuel

The saddest part of the subsidy saga is that corn isn't actually all that good as a source for fuel. For years, critics have argued that other crops, including sweet potatoes, wood chips, and even switch grass, can produce more fuel per acre than corn.

Bio fuelIn fact, to make the U.S. corn ethanol industry profitable, lawmakers had to institute a tariff against Brazilian ethanol, which is made with sugar cane. The 54-cents-a-gallon tariff, coupled with the 45-cents-a-gallon corn subsidy, effectively cut 99 cents from the price of every gallon of ethanol produced, making American corn ethanol far more cost-effective than competitors from other countries -- or other crops.

The decisions to drop the corn subsidy and kill the tariff aren't the end for ethanol -- or for the endless debates that surround the alternative fuel. Given the questions about the effect of ethanol on engines, it remains to be seen if the federally mandated alternative fuel goals for the next decade will be reached, but one thing is certain: 10 years from now, far less of the ethanol going into America's gas tanks will be coming from corn.




Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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CA Jeffo

Gasoline is NOT fossil fuel. It's Abiotic.
... Here's why I DON'T like All Oil Companies (especially Shell Oil)....
1]] Oil is Abiotic (not a fossil fuel). Shell knows this and could turn a profit at $1.50 per gallon. Instead of being OK with profit margins in the 10's of millions per year like back in the 70's, 80's and 90's Shell's greed is unprecedented. They are hiking the price for extra profit. And their profit skyrocketed since the 2004 era. In only the third quarter of 2011 Shell Oil posted nearly $7,000,000,000.00 in profit. This greed gone wild is part of the problem for world economic decline. .
2]] Shell bought the patent for a car engine that could use water as a fuel and it's only byproduct is water. They have never used it. And they block other patents.
C] My father worked for Shell and personally viewed a man putting a pill into water, pouring that water into the gas tank of a car and then letting it run for several ours till the fuel ran out. ..... after that test no one ever saw or heard of that man ever again.

Also please read this:
http://thinkprogress.org/climate/2012/07/24/574161/what-five-oil-companies-did-with-profits/?mobile=nc

?Based upon VALUES? .... That's what Bastard Oil Companies are NOT based upon ..... Technology exists to use water as a fuel and as a flame [[[which does not burn human skin]]] ....
http://www.youtube.com/watch?v=pwlOw7iCNrI
http://www.youtube.com/watch?v=2xHvEsUv0wg
http://www.youtube.com/watch?v=zZ2QciCN5Ks
http://www.youtube.com/watch?v=8TAmiUnBTyI
http://www.youtube.com/watch?v=Tf4gOS8aoFk

November 07 2013 at 10:12 AM Report abuse rate up rate down Reply
flyfishy2k

the life of ethanol gas is a lot shorter .thats why you add addites shelf life shorter and on your outboardmotors you better add a fuel seperator. and on your lawn mowers etc. you better run them out of gas at end of season or your carburator will gum up

January 06 2012 at 11:17 AM Report abuse rate up rate down Reply
flyfishy2k

alcohol in gasoline. we do not recommend the use of gasoline which contains alcohol because of the possible adverse effect the alcohol may have on the fuel system if only gasoline containing alcohol is available it must not contain more than 10% alcohol this is from a mercury outboard motor manual 4 stroke

January 06 2012 at 10:13 AM Report abuse -1 rate up rate down Reply
doncleg

Ethanol is the biggest scam ever created by the idiots in Washington. It has not decreased gas consumption one bit. both my 2006 HHR and 2008 suburban(as well as my old suburban) lose 12% mpg, meaning that I am actually burning more gasoline to go a given distance than without ethanol. This doesn't even take into account all the lawnmowers, boat engines, weed whips, chainsaws, etc. blown up by the corrosive effects of alcohol and replaced with new ones built where else, but in China.

January 06 2012 at 8:27 AM Report abuse -1 rate up rate down Reply
nos2001

so taxpayers pay 45 cents for every gallon we buy? add to that, the cost of corn and whet has doubled because of it. demand went up for corn cost went up. wheat farmers switched from wheat to corn... add to that, cows,chicken, pigs etc, what is t the are fed....now you know why meat prices havee gotten so high.

January 06 2012 at 7:17 AM Report abuse -1 rate up rate down Reply
Gabe

The thing to do now is go after all the natural gas and oil that is can be produced in this country and which in most cases can be produced with less pollution than the systems in place in foreign countries. This would immediately greatly lower prices, lower the profits or our enemies that now sell us oil in order fund wars and terrorism, and greatly stimulate our economy putting people back to work.

January 06 2012 at 5:25 AM Report abuse rate up rate down Reply
Paul Baker

I don't mind buying ethenol when I buy gas, I just don't want them mixed because it ruins both.

PS. A gal asked if it makes her car drunk? I told her, probably, but as long as she is doing the driving it would be Okay.
I'm glad she didn't ask about the curise control.

January 06 2012 at 12:18 AM Report abuse rate up rate down Reply
1 reply to Paul Baker's comment
nos2001

i only use 100% gas... it costs me about fifteen cents more per gallon, but i get three mpg more amd my car runs much better and smoother/ ethanol is a very expensive fraud

January 06 2012 at 7:20 AM Report abuse +2 rate up rate down Reply
Bobby Crockett

ALL of the agricultural subsidies represent a problem. They date all the way back to the days of FDR and his attempts to manipulate the economy to end the Great Depression. He paid farmers NOT to grow crops and slaughtered thousands of animals that were buried rather than marketed. Really smart. These same policies have survived in some form or another to this day. FDR could never understand why revenues declined when he raised the income tax rate to record levels on the wealthiest Americans. Not hard to figure out - if you do not invest and have no income to declare, then your tax liability goes down. so do tax revenues. That was the case before the Alternative Minimum Tax. The truism is that if you want more of something subsidize it; if you want less of it, tax it. That has held true for the longest time. Politicians just continuously prove that they have short memories and short attention spans.

January 06 2012 at 12:02 AM Report abuse +1 rate up rate down Reply
danbits

Mr. Bruce Watson must have an IQ equal to the blenders subsidy. 45 Wow that is off the scale. What a moron.

January 05 2012 at 11:43 PM Report abuse rate up rate down Reply
JIM

The truth has been there for years but our ignorant leaders had money to spend and they were going to get rid of it somewhere. Corn ethenol is not a safe of viable fuel for cars. How much did they pay Nascar to use it?

January 05 2012 at 10:09 PM Report abuse +2 rate up rate down Reply