Thursday, August 30, 2007

Don't Blame Ethanol for the Price of Food

In a recent opinion piece, dairy farmer and columnist John Ishler, of Spring Mills, PA writes from his perspective concerning recent media attention towards ethanol and food price increases.

Some of his key points in his essay include:
  • A number of recent news stories and radio talk shows have claimed that higher corn prices due to the demand for ethanol are causing higher food prices. These reports are usually vague about the specific connection and usually have few if any facts that higher corn prices have influenced consumer food prices.
  • Corn prices actually have dropped this summer. After rising to $4 per bushel last spring, they are now down to just over $3 a bushel.
  • Worldwide supply-and-demand economics have played a key role in increased food prices.
  • An early freeze that devastated fruits and vegetables, low supplies of wheat and the rising cost of energy all have factored into increased food prices. And much of the overall increase comes from foods that don't contain corn, including fish, fruits and vegetables.
  • Corn producers don't think there is a conflict between food and fuel. They think they can produce enough for both.
  • Feed prices also get blamed for increased milk prices in the store. But feed costs are not even part of the formula that determines the price of milk, so there is no way dairy farmers can pass on their costs to bottlers and consumers, like many businesses do.
  • Several trends that have raised the base price of milk paid to dairy farmers, including a long drought in Australia, a global supply shortage of milk powder and whey, a growing demand for milk powder in Asia and the rapid growth of cheese consumption in the United States.
  • Farmers make up less than 2 percent of the country's population and they are easy targets of blame for increased food costs. But here are some statistics on the farmer's share of the consumer's food dollar:
    • Bacon, 1 pound, retail $3.29; farmer's share 52 cents.
    • Sirloin steak, 1 pound, retail $7.99; farmer's share 94 cents.
    • Bread, 1-pound loaf, retail $2.49; farmer's share 10 cents.
    • Lettuce, 2-pound head, retail $1.79; farmer's share 28 cents.
    • Milk, 1 gallon, retail $3.79, farmer's share $1.42.
    • Cereal, 18-ounce box, retail $5.05; farmer's share 7 cents.
    • Potato chips, 13.5-ounce bag, retail $3.49; farmer's share 11 cents.
The retail prices are based on Safeway brand products. The complete study, conducted by the National Farmers Union on June 27, is available at

John also notes that every business owner knows that the cost of doing business in today's environment continues to escalate and that running a farm business is no different.

You can read the entire essay HERE.

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