Ethanol Macroeconomics Explain How the Essay

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An acre of corn will yield roughly 5,500 dry pounds of stover, enough to produce about 180 gallons of ethanol" (Baker & Zanier 2006). But once again, such intensive farming methods could result in depletion of the soil and ultimately hamper the fertility of the soil, given that corn stover is usually left on fields to minimize erosion. Ideally, the creation of new technology would improve productivity without hampering long-term soil quality.

At present, to make ethanol production more profitable, by-products are used as livestock feed (Baker & Zanier 2006). If new technology rendered corn farming more efficient, theoretically the price of ethanol and fuel would drop dramatically, given that supply would increase, and farmers could price the product more cheaply while still make a profit, and also profit more off of by-product sales. But given that corn is a subsidized crop within the U.S., this means that prices cannot fall to rock-bottom prices.

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"In 2009, $15.4 billion in subsidies were lavished on the growers of corn, cotton, rice, wheat, and soybeans" (Carr 2010).

The system of agricultural subsidies and support currently in place would have to be rethought, if corn production grew notably more efficient and ethanol became a viable source for all fuel. This would incentivize production to such a degree many more producers would enter the market, making the subsidized price even more egregiously high in the eyes of consumers. The idea of cheap fuel through the use of ethanol is attractive, of course, given that this could result in cheaper prices for all goods and services transported by gas at present. However, it still remains uncertain to the degree to which ethanol is a truly environmentally-beneficial product and how to restructure the subsidy system so the American consumer will benefit from lower fuel costs......

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