On my fields, I can generally count on receiving about 1 Million gallons of rainfall per acre, per year. Even at 200 bushels of corn per acre, that comes out to 5,000 gallons of water available to grow each bushel of corn (and each bushel of corn will, in turn, yield more than 2.8 gallons of ethanol). Even so, corn which is used as ethanol feedstock, is still available as animal feed. Only the starch is removed, ruminants don't benefit all that much from the starch in corn anyway, and nobody really suggests that the average American needs all that much more corn sugar in his diet.
The fact is that the rain which falls on my land is mine. If I want to use it to grow corn, that's my business. If someone else wants to use his water to have a nice big pretty yard, and not produce a damned thing of value, that would be his business.
What's wrong with fuel ethanol in the US isn't that corn uses too much water, it's that the central government has chosen to screw with the market (the same thing that's wrong with electric cars, passenger trains, letter delivery, education, medical care, ad infinitum).
What I said about corn and ethanol might not apply to you, if you’re growing the crop without irrigation. However, it does apply to drawing down aquifers.
I agree with your point about government interference in the market. If corn ethanol had to compete in a market free of mandates and (perhaps) subsidies — how much corn would be grown to convert to ethanol. In the midst of a drought, wouldn’t water be worth too much to waste on growing a crop for fuel — especially where there is no net energy savings?
Obviously, you know the circumstances on your farm better than anyone; and I do empathize with your plight (regarding the drought). I hope it all turns around soon.