Wednesday, May 28, 2008

Ethanol is Not Major Factor in Food Cost Increases

University of Nebraska Food FuelWhile food prices in the U.S. rose in 2007 and early 2008, another new study shows that ethanol is not the major cause.

Richard K. Perrin, the Jim Roberts Professor of Agricultural Economics at the University of Nebraska, recently studied the effects of food prices caused by demand for corn for ethanol.
"The popular press has tended to attribute these food price increases to demand for corn by the ethanol industry. Grain prices are one determinant of food prices, but they constitute less than 5% of food costs in the U.S. (a higher percentage elsewhere.)"
The study finds that ethanol is responsible for no more than 30-40% of the grain price increases of the last 18 months.

Food prices in the US increased about 16% over the last five years,7% over the past 18 months, but rising grain prices have contributed only about a 3% cost increase over these periods.

It is reasonable to conclude that ethanol is responsible for increases in US food prices about 1% in the last two years – a relatively small proportion of actual of U.S. food price increases.

Despite the propaganda generated by biofuels critics, the facts back up that ethanol is not the culprit.

Source: Ethanol and Food Prices, Richard K. Perrin, University of Nebraska

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