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American farmers produce an enormous corn crop, and about one-third of it goes into the gas tanks of our cars - one-third. With the help of government subsidies, corn is turned into ethanol to boost the country's use of renewable fuels. But the big demand for corn also pushes up its price.

LINDA WERTHEIMER, host:

That's good for the farmers who grow corn, but not for the meat and dairy farmers who rely on corn as the main feed for their livestock. In part two of our ethanol series, Harvest Public Media's Kathleen Masterson looks at what supporting ethanol means for the food we eat.

KATHLEEN MASTERSON: In the big kitchen at the Green Hills Retirement Community in Ames, Iowa, workers scurry about. Chef Chris Stelzer is directing platters into the dining hall and expertly flipping pancakes while a huge noisy vent wicks up warm bacon-scented air.

Stelzer likes to cook the seniors things that remind them of home meat and potatoes, Angus beef, pork loin. It's with these foods that he's seen the most drastic rise in prices.

Mr. CHRIS STELZER (Chef): The prices of beef and pork have definitely gone up in the last few months. Tenderloin's gone up about two dollars in the past month or two a pound. And pork's gone up about a dollar or so.

MASTERSON: Stelzer says while meat prices always go up at the holidays, this year the increase started earlier and went higher. And USDA figures show meat costs up as much as 12 percent since last year. But let's get out of the kitchen for a minute. This is a story about corn. Because when you're eating meat, you're indirectly eating lots of corn. Far more corn goes into the meat you're eating than a box of cornflakes. When it comes to raising meat, eggs and dairy, feed is the biggest cost. And most likely that feed is corn.

For years, the livestock industry has been the main buyer of cheap and plentiful corn. Then came the ethanol mandate in 2005. Ultimately the government required that we use nearly 13 billion gallons of ethanol this year. And the way we make ethanol here - yup, you know this one: corn.

To further boost using corn to fuel your car, Congress created subsidies paying gasoline blenders for every gallon they blend with ethanol. Not surprisingly, in the last five years the ethanol industry's consumption of corn has tripled. Now our cars are burning up a one third of the nation's corn crop.

Professor BRUCE BABCOCK (Iowa State University): I don't see why we can really justify subsidies when all that does is it raises the cost of producing food.

MASTERSON: That's economics Professor Bruce Babcock at Iowa State University, who says ethanol policies increase the cost of food at least 1.5 percent. The impact on meat prices is significantly higher. It's economics 101: ethanol plants increase the demand for corn, driving up the prices for other buyers -like livestock producers. International demand is up too and we're exporting more ethanol than ever before. Many grain farmers are seeing record incomes this year.

American Meat Institute's J. Patrick Boyle says it's all unfair because the ethanol industry is benefiting from a trifecta of government subsidies.

Mr. J. PATRICK BOYLE (American Meat Institute): The government mandates the consumption of your product, subsidizes its production, and then insulates the product from international competition.

MASTERSON: He says it's time for the industry to stand on its own two feet.

Mr. BOYLE: That tax credit today is costing the American taxpayer about $5 billion this year. We think that is way too much money to begin with and we think it's gone on way too long as well.

MASTERSON: But guess who disagrees? The Renewable Fuels Association says the meat industry just wants to return to the days when the subsidies helped them.

Matt Hartwig argues that for years before the ethanol mandate, corn prices were artificially low.

Mr. MATT HARTWIG (Renewable Fuels Association): Look, in the past the government has paid farmers when the price of corn fell below a certain point. We were doing that for decades, to the tune of several billion dollars a year. Now the corporate livestock industry, the junk food industry, they all loved that.

MASTERSON: Ethanol demand has helped to send corn prices soaring. And economist Bruce Babcock says the mere fact that ethanol comprises about eight percent of fuel consumed in the U.S. has already changed the ebb and flow of the commodity market behind food.

Prof. BABCOCK: We've now hitched the price of corn, inextricably linked the price of corn to the price of crude oil, and I think we can't turn the clock back. That's the way it is.

MASTERSON: With corn prices more closely tied to oil prices, when the price of gas goes up, it raises the demand for ethanol. That means consumers will feel it in two places: at the pump and on the dinner table.

For NPR News, I'm Kathleen Masterson in Ames, Iowa.

WERTHEIMER: Our series continues tomorrow with a report on the battle over marketing ethanol blends at the pump.

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