This is a test to see if the comments work (they didn't on BusinessGreen.com)

John Sterlicchi needs to broaden his reading on this issue, and not simply the press releases of the ethanol lobby and the big processed-food producers.

First, the subsidies to the ethanol industry are not $5 billion a year, but nowadays about twice that. The $5 billion refers only to the largest subsidy, the blenders tax credit. There are many other subsidies, most notably at the state and local levels, supporting the industry. As well, the federal government protects the industry from foreign competition with a hefty import tariff, and mandates a minimum market size for the product. For the most full accounting of the various support measures provided to date, see "Biofuels--At Any Cost?".

Mr. Sterlicchi writes that "the naysayers want the subsidies phased out not only because they say they are driving up food prices, but also because ethanol research is now showing that corn-based biofuels could be bad for the environment as well." True enough. But there are also plenty of naysayers (not to ethanol per se, but only to the subsidization of ethanol) who can do the math and foresee the damage that selective government support for domestically produced ethanol is having, and especially WILL have, for the economy. (See, for example, the recent reports by the Environmental Working Group, and by Dennis Keeney, Emeritus Professor at Iowa State, both discussed here.

None of the serious critics of ethanol-support policies are saying that ethanol was the ONLY factor driving up food prices through last July. But Mr. Sterlicchi could do a better job by pointing out that if the consumer price index for food is the basis for one's comparison, even a 4% increase in that index is huge -- given that the underlying household expenditure on food (45% of which is weighted by the cost of meals eaten outside the home) to which it refers is over $1.1 trillion a year. The costs of commodities account for only about 20% of the 55% that refers to food purchased directly for home consumption, so it takes a 10% increase in the price of all commodities (on average) to make the CPI for food increase by 1%. Increases in the prices of fuels are felt throughout the food chain, so naturally can have a big increase on final food prices.

However, what matters more to critics of biofuel mandates and subsidies is what those policies do to the prices of grains and oilseeds, as these prices account for a much larger share of the final price of basic staple foods consumed by the poor in places like Haiti and Africa. I suggest that John Sterlicchi have a read of the trenchant analysis by Donald Mitchell of the World Bank, "A Note on Rising Food Prices".

What Mitchell did was decompose the various elements in the index of food commodities (i.e., more or less the wholesale prices of corn, wheat, rice and oilseeds) into the various influences -- energy costs, the fall in the value of the dollar, declines in production of wheat elsewhere -- and then was left with a residual attributable to biofuels, speculation and counter-productive government interventions (like export bans). But he argues persuasively that the rising (government-stimulated) demand for biofuels(and the worry that the floods in the Midwest would not end in time) helped exaccerbate the general panic in the market, and thus were a factor also in the speculation and export bans.

That there might be a lag between changes in the prices of commodities and the prices of processed food should come as no surprise. Back in 2007 the ethanol industry certainly used that to "demonstrate" that rising commodity prices were not having as big an effect on final food prices as some were expecting. But now that the lag is working its way through in the other direction, they are calling foul.

In any case, this is not simply a debate between the ethanol industry and the food manufacturers, but between the ethanol industry and people who have the good of the country at heart. If the food producers aren't playing fair, so be it. But that should not be used as an excuse to ignore the arguments made by economists, environmentalists and development-assistance agencies.

Mr. Sterlicchi writes that "With ethanol companies struggling at present – with the fuel being more expensive than gasoline – it is important to the industry [that it] has a message that resonates." The main message that resonates with the industry involves holding onto the government teat ever tighter. There is no limit to the subsidies and intervention that the industry is ready and able to demand. Not satisfied with all the other benefits it has extracted over the last 30 years, now it wants a piece of the bailout pie.

When you listen to the arguments from the two sides in this debate, please ask yourself: what does this person have to gain? The WWF, EWG and other environmental groups are looking for a better environment. The industry is simply looking for more subsidies, and more protection from competing producers and technologies.