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RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 8:32:56 AM , Rating: 2
Since there are >2.6 gal of ethanol produced per bu of corn I wouldn't mind splitting up the extra "$2.21/gal," over $6 a bu. you seem to be suggesting ethanol production adds to the value of a bushel (56#'s) of corn. Oh wait, even with corn prices at all time highs it's not worth much more that $4/bu at the farm gate, and 100% Ethanol is worth less than $2.21 a gal on the open market.
For someone with "a degree in math", you've wholly misinterpreted a simple 8th grade word problem. To compute the true cost of ethanol, the amount of corn input isn't required, and you've also confused the hidden costs with the market rate.

The equation is simple:

Total Cost to Consumer = Market Rate + Hidden Cost (this is true for any product subsidized by the government)

To compute in costs per unit, we need Market Rate per unit (price in gallons, which we know) and Hidden cost in gallons. To compute the latter, we simply do this:

Hidden cost/gallon = Total Subsidies Paid / Total Gallons produced.

Now, I don't know if the DATA on that website is correct or not, but they've certainly set up the problem correctly.

RE: Great, even more ethanol BS




RE: Great, even more ethanol BS

RE: Great, even more ethanol BS


RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 10:46:56 AM , Rating: 2
Why don't you enlighten me on the "Hidden Costs." I'd like to plug them into my bank account.

The current farm program is complex. Would you point out the hidden subsidies for ethanol. I think if you look at the farm bill you'll find money for food stamps, school lunch, foreign aid and many other programs. Some minor declining direct payments to farmers were decoupled from production, I see the decoupled payments as a mistake. Other direct payments kick in to keep farmers in business when market prices are so low no farmer could afford to raise corn, beans, wheat etc.; not currently a factor. There are non recourse loans on commodities that the farmer has to repay with interest, often cited as a subsidy. I find it interesting that China has a grain reserve, the USA does not; If you play with fire you get burnt.

There is a blenders tax credit for ethanol, but I wouldn't call that a "Hidden Cost;" lost revenue, sure. The blenders tax credit should encourage infrastructure investment. See article above for GM complaint on blender foot dragging.

I don't see ethanol, especially from corn, as the "answer." However it is not "the evil" either. The fact is ethanol from corn can be done now, but I would think there are better cheaper alternatives being worked on. In a free market the market decides the winners.

RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 12:06:38 PM , Rating: 2
> "Why don't you enlighten me on the "Hidden Costs"

Glad to. A hidden cost is one you don't pay directly. The hidden costs for ethanol are twofold. First is the government subsidy package, which totalled about $3.4B in 2006. That's money you and I pay in taxes, even if we don't see the cost at the pump. The second hidden cost is the lost mileage for ethanol, which forces us to buy more gallons to travel the same distance.


Yes. So what's your point? That one government program deserves another?

> "In a free market the market decides the winners"

That's just the point. Subsidizing ethanol distorts the free market. Alternatives which might truly be cheaper appear not to be, due to the subsidy. Ultimately, that only slows introduction, and forces us to waste resources on less efficient alternatives.

RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 1:10:03 PM , Rating: 2
$3.4 B is nothing. Administrative costs eat a lot of that. I also think you have lumped some of the program costs of the programs I've mentioned in that figure. A figure that you seem to dislike paying taxes for, but you don't mind paying less for food you buy. It's much like taking money from one pocket and putting it in another. Unless of course you don't think that that tax expense is reflected in the lower price you pay at the grocery store. The farm program could have been viewed as a social program, a cheap food program, it subsidizes production and is reflected in lower prices to the consumer. Ethanol wasn't even on the screen when the last farm bill was passed, so it's a bit of a stretch to ascribe the cost to ethanol. I think they are working on a new one right now.

I do agree the blender tax credit and lack of the tax credit on imported ethanol is troublesome. But I'm not sure the argument that alternative sources of energy production are being suppressed because of the "subsidy" is a bit of a reach. I repeat I do not see ethanol as "the answer." I personally view it as an alternative energy source that is opening the door for other alternative energy sources. But to blame current market conditions entirely on ethanol is to deflect the blame from poor planning in the past. Some people seem to be using Ethanol as a smoke screen and ethanol has become a convenient "evil" plot device.

RE: Great, even more ethanol BS
By masher2 (blog) on 1/15/2008 2:11:00 PM , Rating: 2
> "$3.4 B is nothing."

Whoa there! Glad you're not my congressman. And you have to remember that's just for the very small amount of ethanol already produced. The lion's share of that money is the $2.5B spent on the 51 cent/gal blender credit. Which means if we buy ten times the ethanol, the government subisidy rises to nearly $30B.

> "Administrative costs eat a lot of that"

No they don't...and even if they did, it would change nothing. It's still a hidden cost you and I have to pay regardless.

> "But to blame current market conditions entirely on ethanol"

I don't see anyone doing that. The fact that other problems exist, however, doesn't change the rational analysis of ethanol.

RE: Great, even more ethanol BS
By iowafarmer on 1/15/2008 2:48:22 PM , Rating: 2
I don't see a $2.5B tax not collected as a subsidy. I also see I wasn't writing about the same "subsidy" as you were, sorry.

Actually a lot of bad press is not based on a rational analysis. If corn had not been so dirt cheap ethanol production from corn would never have gained traction. Even now it seems to be economically viable.

