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Archer Daniels Midland and Ethanol

Very interesting (and well footnoted) report on Archer Daniels Midland, the staggering amount of government funds they receive and their push for Ethanol during the Carter administration. Carter pushed the subsidies for corn growing and for the production of Ethanol despite advice from people who knew the subject.

I had written about ADM before here talking about their Sugar subsidies and how these affect other businesses.

Back to the report — here is just a brief excerpt explaining the true cost to the consumer for one gallon of Ethanol:

Perhaps the most honest and thorough analysis of the effect of ethanol on farm income and taxpayers and consumers was done by the USDA's Office of Energy in 1986. That study, which included a lower estimate of the inflationary impact of ethanol production on corn prices, concluded,

Corn prices would increase by $0.02-$0.04 per bushel for each 100 million bushel increase in ethanol-induced demand for corn. However, soybean prices would fall by about $0.04 per bushel and soybean prices would fall by $0.12-$0.15 per hundredweight.

Higher corn prices from additional ethanol- induced demand would increase the cost of producing beef, pork, and poultry. Consumer food expenditures would rise by $8.6 billion, or an average of $2.29 for each additional gallon of ethanol produced.

When all the costs and benefits are tallied, the Government, taxpayers and consumers together would lose $6.1-$7.2 billion or $1.61-$1.92 per additional gallon produced during the 1986-94 period if ethanol subsidies were increased enough to prompt the ethanol industry to produce 2 billion gallons in 1995. Conversely, if ethanol production falls to zero, they would save some $6.8-$8.9 billion, or $1.35-$1.76 per gallon not produced.(49)

The study concluded that increased production of ethanol would cost consumers and taxpayers roughly $4 for each $1 of extra farm income.

The report stated,

Increases in consumer food expenditures caused by additional ethanol production far exceed the increases in farm income. Consumers would be much better off if they burned straight gasoline in their automobiles and paid a direct cash subsidy to farmers in the amount that net farm income would be increased by ethanol production.(50)

Since this report is looking at the money, they aren't following the Thermodynamics. A hint — it takes more caloric energy to make a gallon of Ethanol than you can recover from the Ethanol.
Making Ethanol is an Energy Sink not a Source…