What's causing grocery bills to rise? Some blame policies that have made it especially profitable for farmers to divert their crops into corn for the production of ethanol. "The ethanol industry is hogging more and more of the corn supply, and that is squeezing ranchers and dairy farmers," says Daniel Griswold, director of the Center for Trade Policy Studies at the Cato Institute, a Washington, D.C., think tank.
The federal government gives preferential treatment to domestic, corn-based ethanol in the form of a 54-cent-per-gallon tax on imported ethanol
That tax comes on top of a 51-cent exemption from the federal excise tax on gasoline that goes to fuel mixed with ethanol.
These subsidies raise the demand for domestic ethanol. That drives up the price of not only the corn used to produce the ethanol but also of wheat and soybeans, which farmers plant less of because they switch to corn. That, in turn, translates into a scarcer supply—and higher prices.
clipped from: www.usnews.com