Ethanol Will Become a Fad Without Government Intervention

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by: Konrad Imielinski

John McCain and twenty-three other Republican Senators sent a letter last Friday to the EPA asking the agency to reevaluate the current ethanol mandate as food prices continue to soar. The EPA does have the authority to waive the mandate or structure it differently "if the mandate results in adverse unintended effects."

In the letter, McCain stated:

Every time hardworking American families buy groceries, they feel the financial sting of misguided federal policies mandating that taxpayers support ethanol. It isn’t a surprise that food prices are rising when more than 25 percent of the corn grown today is taken out of the food supply and instead used for subsidized ethanol production. This subsidized program - paid for with taxpayer dollars - has contributed to pain at the cash register, at the dining room table, and a devastating food crisis throughout the world. We need to put an end to flawed government policies that distort the markets, raise food prices artificially, and pit producers against consumers. We must call on the EPA to exercise its authority to not exacerbate this already bad situation.

Obama, two days later, on "Meet the Press" stated that, "there's no doubt that biofuels may be contributing to [rising food prices]."

With the growing political concern over ethanol, May corn on the CBOT fell 20 cents today to $5.82 per bushel.

In Monday's trading, VeraSun slipped 9.61% to $6.21 a share while Aventine dropped 7.73% to $5.01 a share.

Without government intervention, ethanol will become a fad real quick.