Ethanol Mandate Raises Concern For Corn Prices

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Dave Levitan reports the federal mandates for ethanol without a backup plan in case drought or flooding limits corn production could double corn prices.

A report by economists at the University of Illinois shows corn prices could rise from $3.50 to $7 if severe weather hits the corn belt. The economists say there’s a 10 percent chance severe weather will occur in any given year.

As the amount of corn used for ethanol increases each year corn gets more expensive. In 2005-2006 about 1.6 billion bushels were used for ethanol, that amount has grown to almost 3.7 bushels in 2008-2009. The overall percentage of corn used for ethanol has increased from 9.5 percent to 22 percent. With the 2007 Renewable Fuels Standard Program in place, corn prices rise while the availability of corn for food decreases. If severe weather limits corn supply, ethanol could use as much as 40 percent of corn produced this year.

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