Ethanol subsidies push cost of pork through the roof

Mike Riggs Contributor
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Ever heard of the expression, “unintended consequences”? Economists use it when they discuss the side effects of stupid government decisions. Here’s Bloomberg with a glaring example:

U.S. meat prices may rise to records this summer after farmers reduced hog and cattle herds to the smallest sizes in decades, the result of surging feed costs linked to demands for more ethanol.

Wholesale pork jumped as much as 25 percent this month to 90.68 cents a pound last week, the highest since August 2008, U.S. Department of Agriculture data show. Beef climbed 22 percent this year to $1.6896 a pound on April 23, the most expensive since July 2008. Chicken’s gain in March was the most in 20 months.

Demand for pork chops, steaks and chicken breasts is rising as the economy improves, backyard barbecues resume and China and Russia allow more U.S. imports. Domestic supplies may drop to a 13-year low because of culls to stem losses caused by corn prices that doubled after former President George W. Bush set targets to increase ethanol use.

So, consumers pay more while energy companies like Kinder Morgan Energy Partners continue to capitalize on a bad decision that no one wants to take back:

“We also benefited from further increases in ethanol demand, boosted by a mandate in California to increase the amount of ethanol blended into gasoline from 5.7 percent to 10 percent. As we noted previously, while the growing use of ethanol as part of the country’s fuel supply tends to reduce pipeline volumes, our investments in ethanol storage and blending infrastructure have enabled us to recover those revenues and cash flows.”

To top it all off, you’re paying more for porkchops, and the government is showing no sign that it will funnel money to ethanol producers:

Jennings’ cellulosic ethanol plant got a $4.9 million boost from the federal Department of Energy (DOE) this week to continue its work at its demonstration-scale facility just east of town.
Verenium Corp. announced that the funding comes from a cooperative agreement, which is also an extension of a grant awarded to the company in July 2008. Verenium is working on refining biofuels from local feed crops, grasses, plant waste and wood chips and hopes to eventually take what it learns from its Jennings plant to create a new, viable bio-ethanol industry.