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Agriculture experts warn that ethanol subsidies creating real estate bubble; similar conditions in the 70s produced 80s collapse

April 21, 2008

Agricultural experts warn that US corn farmers are exposed to a potential “crash” owing to ethanol subsidies. “U.S. energy policy has been friendly to ethanol in the last couple of decades. The question is, will it continue to be. It’s running up food prices and that’s causing pressure on Congress to limit mandates for ethanol usage,” Neil Harl, an emeritus professor of economics at Iowa State University, told the Boston Herald.

The resulting rise in corn prices has increased land values, and prompted large-scale borrowing for new land acquisition by famers. A similar increase in land prices in the 1970s, prompted by food price increases and tight supplies, led to a farm crisis in the 1980s when US agricultural policies changed. More than 300 agricultural banks failed in the 19080s when land prices dropped dramatically.

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    Written by Jim Lane · Filed Under Policy 

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