Saturday, October 20, 2007

Don't Blame Ethanol for Higher Food Prices

Tom Buis, president of National Farmers Union, wrote an op-ed "Don’t blame ethanol for higher food prices" which ran this week in The Hill newspaper in Washington DC.

Tom's opinion piece responded to several concerns that critics of ethanol have used to confuse the public and policymakers. The following are a few sections with a bit of explanation.

The first points focused on consumer's concerns over rising prices:
It’s only natural that consumers want to know why prices are increasing at their neighborhood grocery. The big oil lobby and a host of special interest groups have begun promulgating the myth that increased ethanol production, and its demand for corn crops, is responsible for increased food costs. It’s a gross oversimplification, and in fact, it’s plain wrong.
Tom showed an easy example of how little impact corn price increases really play in the final retail price of food:
According the U.S. Department of Agriculture, non-farm costs including marketing, processing, wholesaling, distribution and retailing account for 80 cents of every food dollar spent in the United States. An 18-ounce box of corn flakes is priced at $3.70 in Washington, D.C. grocery stores. The farmer’s net share of that total? Five cents. There is a lot more at play than corn prices. Furthermore, Americans spend less on food than anywhere else in the world. Of every dollar Americans spend, just 9.9 cents is spent on food.
We've explained here many times that grain prices play a no or only a limited role in food cost increases. Tom shares that other factors are also causing rising food prices, specifically labor costs.
Beyond rising energy costs, inflation also leads to increases in food prices. According to the Bureau of Labor Statistics, 25-year average annual food inflation rests at about 2.9 percent. Over two years, from June 2005 to June 2007, American consumers saw prices increase 3.4 percent. Food prices have always and will continue to increase. Government statistics confirm that the increase consumers face is standard.
He goes on to explain that ethanol is not a "food or fuel" issue at all but rather "food and fuel" by sharing the value co-products that are derived from the ethanol production process:
Further, it is a false premise to say that corn used for ethanol means less feed options for livestock producers. Ethanol plants make two products — ethanol and high-quality distiller grains that are an excellent feed source for livestock. Only the starch from a corn kernel is used to produce ethanol. The remaining two-thirds of each kernel contain significant proteins that are highly valued in the world’s food and feed market. It’s also important to note that corn is one of many components in livestock feed, and only a small portion of the overall livestock cultivation input costs.
Finally, he concludes with these final thoughts concerning the benefits to promoting American-grown ethanol:
  • America’s family farmers and ranchers have been feeding the world for more than 200 years.
  • Increasingly, we are helping our nation become less dependent on foreign oil from some of the most unstable regions of the world by producing home-grown renewable energy.
  • Ethanol production is a lifeline for many struggling rural communities. Ever-increasing ethanol plants are the reason you see the boards coming off the windows of once-struggling rural Main Street businesses.
  • Increased ethanol production is creating economic opportunities for rural communities, restoring profitability to family farmers and ranchers, and providing a clean, safe renewable fuel for our nation’s future.
Read the full article HERE

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1 comment:

eredux said...

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