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Food for Thought on a Friday

May 13, 2011


Federal government data released today tells Americans what they already knew:  prices for everything from cars to cereal to gasoline have been on the rise.  The Consumer Price Index rose 0.4 percent in April and is up more than 3 percent from a year ago.  According to the Labor Department, food and gasoline prices led the way in April, posting 0.4 and 3.3 percent gains respectively. None of this is a surprise to most Americans.  With oil prices yo-yoing around $100 per barrel each and every day, it is inevitable that prices for everything from fuel to food to fingernail polish will rise.  Unfortunately, some will choice to the volatile and rising price of oil as cover to scare and mislead American consumers about the real cause of price increases. Take the chief lobbyist for the corporate meat processors, J. Patrick Boyle of the American Meat Institute.  In an orchestrated series of opinion pieces, the most recent in oil-friendly Oklahoma, Mr. Boyle repeatedly misleads Americans about the role of American ethanol in rising food prices and intentionally excludes key facts about ethanol. For example, Mr. Boyle laments that farmers are getting a strong market price for their corn (meaning his members can no longer buy it at rate subsidized by American taxpayers) and the lack of available feed supply.  What he doesn't tell readers, as Paul Harvey would say, is the rest of the story. Domestic ethanol producers are supplying more than 35 million metric tons of livestock feed each year.  Put into context, the livestock feed production of American ethanol producers is enough to produce 50 BILLION quarter pounders a year – that's 7 hamburgers for every person on the planet. Mr. Boyle isn't alone in his misguided attacks on ethanol as a cause for food price increases.  He is frequently joined in both word and dollars by extreme environmentalists and the oil industry.  All erroneously place blame on ethanol when other factors – speculation, energy prices, weather, growing global demand – play far more influential roles. A recent analysis from the Center for Agriculture and Rural Development (CARD) determined that tax policies supporting ethanol, those very tax policies maligned by Mr. Boyle and others, contributed only 8% ($0.14/bushel) of the increase in average corn prices from 2004 to 2006-2009. Joining with this analysis is a newly published paper in the peer-reviewed journal Biomass and Bioenergy that found very little support for statements that ethanol was the driving factor in the last quick run up in commodity prices in 2077-2008.  Quoting from the paper entitled "Impact of biofuel production and other supply and demand factors on food price increases in 2008":  "It is not possible to reconcile claims that biofuel production was the major factor driving food price increases in 2007–2008 with the decrease in food prices and increase in biofuel production since mid-2008. The available data suggests that record grain prices in 2008 were not caused by increased biofuel production, but were actually the result of a speculative bubble related to high petroleum prices, a weak US dollar, and increased volatility due to commodity index fund investments." This new analysis follows closely with reports released from the World Bank and the government of the United Kingdom on the very same issue.  A March 2010 report by the United Kingdom's Department for Environment, Food and Rural Affairs found that "Available evidence suggests that biofuels had a relatively small contribution to the 2008 spike in agricultural commodity prices." Even the World Bank, which in 2008 suggested biofuels was playing a large role in higher food prices, released an analysis in July 2010 that found "...the effect of biofuels on food prices has not been as large as originally thought..." and that "...the use of commodities by financial investors may have been partly responsible for the 2007-08 spike." Compounding the impacts of speculation, energy prices, and weather events is the wasteful nature of the current food distribution network.  A recently released report from the United Nation's Food and Agriculture Organization found that one-third of all food is wasted – either thrown out or left to waste in fields or in storage. The fact is that ethanol's impact on grain and food supplies is marginal.  For example, U.S. ethanol production uses 3 percent of global grain supplies and none of the food grains like rice.  Moreover, American farmers continue to respond to market signals with USDA projecting record corn production this year. The bottom line is simple:  America's addiction to oil is putting our entire economy on the OPEC rollercoaster.  In order to get off the ride, we must put aside foolish and unfounded rhetorical flourishes and focus on the production of renewable alternatives to petroleum.  Today and into the future, that means ethanol from all sources.