What is in this article?:
- On Ethanol: There They Go Again
- Food vs. fuel
Food vs. fuel
Simply put, the Renewable Fuels Association points out, U.S. ethanol production represents only 3% of the increasing global grain supply. As such, it can have little impact, if any, on global food prices.
But we can even take this whole argument a step further and call out the many organizations that have refuted and repudiated the “food vs. fuel” theory. We’ve done this before but it obviously needs to be re-stated and expanded. Some folks just haven’t a clue.
Shortly after the 2007-2008 spike in corn prices, the USDA has said that “Higher corn prices pass through in retail prices at a rate less than 10% of the corn price change.” The Congressional Budget Office said that ethanol accounted for only 0.5-0.8 percentage points of the 5.1% rise in food prices from 2007 to 2008 – meaning other factors such as energy costs represented up to 90% of the increase. The Federal Reserve said that non-farm costs continue to add the most to the retail food dollar – from 59% in 1959 to 80% today, due primarily to rising labor and energy costs. And research from Texas A&M said that higher corn prices have had very little effect on consumer food prices and that higher energy prices should be viewed as the underlying force driving economic change.
More recently, with corn and food prices trending in the news again, the research is the same.
The United Kingdom’s Department for Environment, Food and Rural Affairs issued a report in March 2010 that discounted biofuels impact, stating “Available evidence suggests that biofuels had a relatively small contribution to the 2008 spike in agricultural commodity prices. Studies which have found a large biofuel impact across agricultural commodities have often considered too few variables, relied on statistical associations or made unrealistic or inconsistent assumptions.”
In a July 2010 report, the World Bank stated that “the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors may have been partly responsible for the 2007-2008 spike.”
When such influential media outlets as the Wall Street Journal ignore these facts, they do a great disservice to American consumers – and to their own reputation.
At a time when there is civil unrest tied to higher food prices, experience tells us we need to look at all the causes and the closer we can get to the root issues the closer we will be to a real lasting solution. And there certainly are many causes to choose from, such as speculation in commodity markets, corrupt foreign regimes, currency fluctuation, hoarding by other countries and, of course, the weather, about which we can do precious little. We also need to wonder to what degree this turmoil is caused by food prices as opposed to say, a desire for democracy.
In the final analysis, attacking corn and ethanol are only a diversion for those who want a quick PR opportunity or have some lurking ulterior motive. Otherwise, it’s a waste of time for those who want to bring about a real, positive change. Let’s get to work doing what farmers are doing every day –feeding and fueling our families at home, and a growing global population.