Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: East
Corn+Soybean Digest

Myth Of Ethanol And Food Prices

What a difference a year makes – unless you’re a grocery manufacturing company or oil conglomerate CEO. A few months ago, farmers couldn’t pick up a magazine or turn on the TV without being lambasted with reports of ethanol driving up food prices.

The Congressional Budget Office has released a report entitled, “The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions,” which says increased ethanol production caused food prices to rise by a whole 0.5 to 0.8 of a percentage point in 2008. The reaction of the media: A big yawn.

Typical of the near hysteria generated last year was a Time magazine article, “The Clean Energy Scam,” that blamed increases in biofuels for rising food costs. If the editors of Time even noted the findings of the CBO report, they did a good job of hiding it.

The report did not go unnoticed by groups such as the American Farm Bureau Federation and Growth Energy, a new organization aimed at promoting ethanol for its environment benefits. Tom Buis, former president of the National Farmers Union, is its CEO.

Leaders of those groups held a news conference to discuss the findings of the CBO report on April 16. At one point, they were asked how they could get the message out that ethanol production played such a miniscule role in rising food prices last year.

“That depends on the coverage you guys give us,” said Buis, who added he hoped Congress will use the CBO report as a springboard to finding out why grocery prices have not fallen in step with commodity prices in recent months.

“We hope the CBO continues its work so we can better understand the true impact energy prices and speculation played in raising commodity and food prices,” he said. “Why have corn prices fluctuated wildly over the past 12 months even as ethanol production has steadily increased.”

The spokesmen said they were not surprised by the CBO’s findings, which seemed to confirm what some of their economists had reported during the height of the food price hysteria.

“With so many fingers in the till between the farmer and the consumer, numerous factors are responsible for higher food prices,” said Farm Bureau President Bob Stallman. “A close examination of all the components of the food price dollar is necessary.”

The National Farmers Union calculates the farmers’ share of food costs monthly. At the end of March, a box of corn flakes was selling for $2.99, said Roger Johnson, the NFU president. The farmer’s share of that: 6¢, or less than 2%.”

That doesn’t tell the whole story. “If you compare the costs of food with the savings from ethanol of an average of 34¢/gal.,” he notes, “the numbers say that for every $1 that food prices increased, consumers saved $5-8 at the gasoline pump.”

The report also exposes the myth that farmers can’t grow enough corn. “The reality is the pie is getting bigger and more can go for ethanol without taking away corn from food and feed,” says Rick Tolman, the National Corn Growers’ CEO. “It is not a zero-sum game. Agriculture is in the midst of a tremendous technology boom that is increasing productivity with the same or fewer inputs.”

The grocery manufacturers have yet to respond to the report. But then they got what they wanted last year: lower commodity prices.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.