Good News....? Not!

Another record month for U.S. ethanol exports

Top destinations in July were Canada, Brazil, and European Union. Through the first seven months of 2011, the United States has exported 588.5 million gallons of ethanol, or roughly 7.5% of total output during that same period. Year-to-date exports in 2011 are already more than the combined total of 2009 and 2010 exports. The U.S. ethanol industry remains on pace to export 800-900 million gallons of ethanol for the entire 2011 calendar year.

Exports of denatured ethanol in July topped 100 million gallons for the first time ever, coming in at 104.6 million gallons. For context, this is equivalent to the annual output of a typical large ethanol facility. Canada was the top export destination in July, receiving 33.8 million gallons of denatured product. Brazil imported 16.1 million gallons, while the United Kingdom (14.0 mg), United Arab Emirates (13.6 mg), and Netherlands (12.3 mg) rounded out the top five. Together, the top five destinations accounted for 86% of July denatured ethanol exports.

This U.S. government's instance on interfering with market forces is completely screwing the typical U.S. consumer (unless you don't eat food or use energy).

1) U.S. Government mandates the use of ethanol, which diverts corn supplies away from food/feed and into ethanol production.  Unfortunately, even this fake market created by the mandate is not enough to make ethanol production profitable, so;

2) the U.S. government must subsidize the manufacturing of ethanol.  Because it is corn based it yield 1.5 units of energy for every 1 unit of energy input into producing it (when taking into account the fuel burned by the grower, the energy used to transport and the fact that ethanol is less efficiently burning than petroleum based fuel.  So;

3) the price of U.S. corn doubles, then doubles again because it is short supply.  "Why is it in short supply," you ask?  We grow a lot of corn.  True, but the price of sugar is also increasing.  "What does that have to do with the price of tea in China?", you ask.  Well, as it turns out, after all the subsidies, U.S. based ethanol is cheaper (falsely, so) than sugar cane based ethanol (which, btw, yields 7-8 units of energy for every 1 unit of energy it takes to produce it).  So, we import Brazilian ethanol, while Brazil imports U.S. ethanol.  Confused?  You should be.  

4) So producers (specifically poultry producers) are losing money hand over fist.  The government's response?  Spend $40 million tax payers money to "subsidize" the poultry industry.  BTW - $40 million is less than a half day of the industry's production, so all they are doing is throwing good money after bad.

5) So, you are getting ready to ask, "Why can't farmers just grow more corn?"  Maybe because growers have land in conservation and are being paid to produce NOTHING (or maybe something besides corn). 

Net effect?  

Everyone pays more for the ethanol, the food and the taxes to support this lunacy.

Anyone else feel like screaming?

And congress wonders why they have single digit approval ratings.
The lesson?  Government ought not try to pick winners and losers through tax policy, subsidies, set-aside, et. al....