UN urges US to cut ethanol production

Financial Times August 9, 2012: The UN has called for an immediate suspension of government-mandated US ethanol production, adding to pressure on Barack Obama to address the food-versus-fuel debate in the run-up to presidential elections.

Most US ethanol is made from corn. The dispute over ethanol promotion pits states such as Iowa that benefit from higher corn prices – and in some cases are swing states in the election – against livestock-raising states such as Texas that are helped by lower corn prices.

 The UN intervention will be seized upon by state governors, lawmakers and the meat and livestock industry, who have expressed alarm at surging prices for corn. Members of the Group of 20 leading economies – including France, India and China – have already expressed concern about the US ethanol policy.

The US is poised to divert around 40 per cent of its corn into ethanol because of the Congress-enacted mandate despite “huge damage” to the crop because of the worst drought in at least half a century, José Graziano da Silva, director-general of the UN’s Food and Agriculture Organisation, warned.

“An immediate, temporary suspension of that [ethanol] mandate would give some respite to the market and allow more of the crop to be channelled towards food and feed uses,” he wrote in an opinion piece in the Financial Times.

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