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Corn+Soybean Digest

Food Vs. Fuel

The old Buffalo Springfield band had a song with lyrics that are very appropriate for the potential war between food and fuel, “There’s somethin’ happenin’ here/What it is ain’t exactly clear/There’s battle lines being drawn…” In this case, it is not the Vietnam era, but the potential challenges of food vs. fuel looming on the horizon for the next decade.

For years, inexpensive food and feed have been taken for granted in many developed countries. With Washington, D.C. passing the energy mandate, the gold rush is on to meet and exceed standards utilizing commodity crops for energy. Food prices are rising not only in the U.S., but also throughout the world.

Grocery costs are up approximately 5% over the past year while feed costs are up 25%; however, one has to look beyond ethanol as the sole culprit. Rising fuel prices as well as the shift to more meat and dairy in diets of people in emerging countries are major contributing factors, with a weak dollar encouraging exports.

While grocery prices are up 5.4% measured by the Consumer Price Index, one needs to drill down on each item. Dairy led the way with a 14% increase; meat, poultry, fish and eggs followed at 5.4%; while fruits and vegetables showed a 4.5% price increase. If corn price nears $4.50/bu., expect food prices for meat to increase 7.5% and overall food cost to increase 3-4%.

Yes, the battle lines are being drawn and experts will line up on the energy and fuel vs. food sides of the issue. Water use, possible recession, global warming and overall farm policy will be drawn into the battle, as well. With the elections going full steam ahead, it will be interesting to see who the winners will be in the food vs. fuel battle in the short run, but also over the next decade!

Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.

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