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UN Data Reveals Increased Corn, Ethanol Production Not Causing Food Price Rise

January 13, 2017


The United Nation's Food and Agriculture Organization (FAO) announced Thursday that prices of major global food commodities declined in 2016 for the fifth year in a row. The FAO Food Price Index commodity averaged 161.6 points for the year, 1.5% below its 2015 levels. According to the agency, bumper harvests and prospects for staple cereals offset upward pressure in sugar and vegetable oils. Renewable Fuels Association President and CEO Bob Dinneen had the following statement: "In 2016, the U.S. ethanol industry reached both record production and exports, and according to U.S. Department of Agriculture data issued this week, the final 2016 corn harvest is estimated at 15.1 billion bushels—11% higher than 2015. The FAO news clearly demonstrates that increased ethanol and corn production has not driven up food prices. "The FAO news echoes findings of an analysis the RFA commissioned in November 2016, which found that retail food prices were not impacted in any demonstrable way by expansion of U.S. grain ethanol production under the Renewable Fuel Standard (RFS) over the past decade. The analysis showed that growth in food prices slowed considerably after passage of the RFS, with prices for groceries advancing at roughly half the rate seen prior to the program's adoption. Meantime, the ethanol industry only uses the starch of the corn kernel, and one-third of every bushel of grain used to make ethanol is enhanced and used as animal feed around the world. "On a net basis, the U.S. ethanol industry will use just 2.95% of global grain supplies—a six-year low. More grain is available for both food and feed use worldwide today than ever before. Additionally, only 17 cents of every dollar spent on food pays for the raw farm ingredients in the food item. The other 83 cents pay for processing, transportation, labor, packaging, advertising and other costs. "As yet another analysis has found, it's time to put an end to the demonstrably false 'food vs fuel' myth that our opponents inexplicably continue to pass off as fact. There is more than enough corn to both feed and fuel the world."