Analysis: Why the U.S. ethanol mandate is drought-resistant

Reuters
By Timothy Gardner
Thu Jul 19, 2012 2:06pm EDT

WASHINGTON (Reuters) - At first glance, it would seem like a golden moment for critics of the U.S. law that requires more and more corn to be made into ethanol every year.

The worst U.S. drought in half a century has fueled a 50 percent surge in corn prices to a record of more than $8 a bushel, heightening fears of a food crisis. Even as the crop wilts, the farm economy has rarely looked healthier thanks to high property prices, widespread accessibility to insurance and a four-year commodity boom.

And a renaissance in domestic oil output in North Dakota and Texas is eating into dependence on foreign crude. Supporters of motor fuel made from U.S. grain have long used the foreign oil addiction as an argument for the Bush-era mandate, known as the Renewable Fuels Standard, or RFS.

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