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May The Best Fuel Win

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Something's awry when it costs less - and makes more sense - to feed a hog Cheetos instead of corn.

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Today's Wall Street Journal explains that, as corn prices have reached near-record levels due to the growing demand for ethanol, farmers have turned to alternative feed for their hogs and cattle.

It is now so expensive to put a pound of weight on an animal, it makes more economic sense to feed them things like:

  • Trail Mix

  • Cookies

  • Licorice

  • Cheetos

  • Kit Kat bars

  • Fries

  • Peanut Butter Cups

  • Potato Chips

  • Tater Tots

  • Ramen Noodles

  • Pretzels

  • Popcorn

  • Chocolate Chips


Something's awry when it costs less - and makes more sense - to feed a hog Cheetos instead of corn.


Mmmmm...cattle feed!

So, why ethanol?

  • Ethanol sounds "green".

  • Ethanol gets votes.

  • Ethanol makes for good PR.


After all, what's more wholesome than corn?

If it's used to make ethanol, lots of things are.

The EPA describes a "major source" of pollution as a plant that produces "more than 100 tons of any one pollutant per year."

Federal records show that a single ADM corn processing plant in Clinton, Iowa released nearly 20,000 tons of pollutants in 2004.



Perhaps I should rephrase the question:

What's more wholesome than sulfur dioxide, nitrogen oxides, and volatile organic compounds?

Since 1978, the government has supported the ethanol industry with subsidies to the tune of $11 billion and a production mandate through 2012.

What would happen if ethanol were left to fend for itself in the free market?

No one seems to know.

A report by the Federal Reserve Bank of Chicago said:

"Despite the many analytic tools that economists have to inform public policy, no one...could report that there had been any comprehensive and respectable benefit-cost study conducted to evaluate subsidies and mandates for ethanol production and use."

Time travel may be a reality one day, but I doubt anyone would recommend investing in it until it is something more than a neat idea.




As Jerry Taylor, a senior fellow at the Cato Institute remarked, "The government should stay out of energy markets and let the best fuels win.

Nothing's more wholesome than free-market economics.


No positions in stocks mentioned.
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