My Flex fuel suburban gets 7-9 mpg with E85 whereas it will get 12-13 mpg with gasoline. That that rate, E85 must cost .60 less per gallon for it to match the cost of using gasoline. However, once the spread in price gets greater, E85 becomes more economical.
For overall production costs, I'm not sure where it falls. Since corn is not the most efficient vegetable to make E85 out of, production costs will likely drop in coming years as the distribution network comes on line and more plants are built to create it and the move to sugar beets, garbage, and other means allows more productive distillation in more places.
The bit about E85 driving up other produce prices is baloney though. Like I said above, corn is not the most efficient means of producing E85 and once we get past that, there are plenty of things that can grow in less hospitable places to make E85 out of. This allows all the prime mid western land to continue producing whatever food stuffs they currently do .Not only that, but cattle and other food animals are not being denied food because of E85 production. they actually benefit form it as the left over mash of the distillation process is very nutrient rich meal for most livestock that would otherwise be thrown away.
To view a predominately E85 based transportation base, once has to only look at Brazil of some its neighbors who's E85/gas production is the exact opposite of our own. Something like 95% of their transportation base runs off ethanol and methanol based fuels.
