Saturday, April 12, 2008

New Texas A&M Study Shows Higher Oil Prices Are Impacting Consumer Prices

Texas A&M University Effects of Ethanol on Texas Food and FuelA new study released Friday by Texas A&M's Agricultural and Food Policy Center blames higher oil prices as the underlying force impacting consumer prices and agriculture.
"The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil."
The report, "The Effects of Ethanol on Texas Food and Fuel (pdf)" determined that repealing or waiving the recently enacted Renewable Fuels Standard (RFS) would not result in lower corn prices for livestock and poultry feeders.
"Relaxing the RFS does not result in significantly lower corn prices. This is due to the ethanol infrastructure already in place and the generally positive economics for the industry. The ethanol industry has grown in excess of the RFS, indicating that relaxing the standard would not cause a contraction in the industry."
The study also found that corn and ethanol prices are unrelated with increase prices of household groceries, such as bread, eggs, and milk.
"Important food items like bread, eggs, and milk have high prices that are largely unrelated to ethanol or corn prices, but correspond to fundamental supply/demand relationships in the world."
Finally, the study concludes that speculative fund activities in futures markets have led to more money in the markets and more volatility.

Source: The Agricultural & Food Policy Center @ Texas A&M University

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