How the Ethanol Crisis Affects You:
|
|
Ethanol and Food Prices
Overview
At a time when many Americans are losing their jobs and their homes, and when a
weakening dollar and global demand are increasing the cost of fuel, the government
should not pursue policies that unnecessarily inflate the price of food. Some of
our nation's most respected policy leaders and experts
agree that the grain-based ethanol mandates increase the prices of food and place
undue hardships on U.S. households in a time of financial stress.
The pressure that grain-based ethanol mandates place on corn alone has caused corn
prices to increase 233% between January 2006 and June 2008 (see chart below). Higher
corn prices, in turn, have resulted in higher domestic and global food prices and
place serious economic stress on the beef, pork, poultry, egg, and dairy industries.
Commodity Price Increases
Jan. 3, 2006 - June 13, 2008
Source: CBOT, NYMEX, EIA
Quick Facts
- "Retail meat prices must eventually adjust to reflect increased feed costs, the
only uncertainty is the timing and duration of the adjustment period."
Dr. Joe L. Outlaw, Agricultural and Food Policy Center at Texas
A&M University, Testimony to the United States Senate Committee on Energy and
Natural Resources, June 12, 2008
- The boom in corn-based ethanol production in the United States has led to sharply higher corn prices and, by extension, higher soybean and other crop prices as farmers have shifted acres between crops.
Dr. Joe L. Outlaw, Agricultural and Food Policy Center at Texas
A&M University, Testimony to the United States Senate Committee on Energy and
Natural Resources, June 12, 2008
- Biofuel production has also introduced new food-security risks and new challenges
for the poor, particularly when resource constraints have lead to trade-offs between
food and biofuel production and rising food prices.
Joachim von Braun, International Food Policy Research Institute,
Testimony to the United States Senate Committee on Energy and Natural Resources,
June 12, 2008
- "While much of the increase in the farm prices for corn and soybeans can be attributed
to increased biofuels production, other factors have also contributed to the sharp
increase in prices for these commodities."
USDA Chief Economist Joseph Glauber, Statement before Joint Congressional
Hearing, 5/1/2008
- Increased biofuel demand in 2000–07 is estimated to have contributed to 30% of the
increase in cereal prices.
High Food Prices: The What, Who and How Proposed Policy Actions",
International Food Policy Research Institute, 5/16/2008
- "Ethanol is a very expensive way of delivering gas, and it has made food more expensive.
We still have $116 oil with more ethanol being produced. We've still got expensive
gas and unfortunately, way more expensive corn and soybean, because people divert
to corn and then soybeans go up in price and so on."
Warren Buffett Interview with CNN, 5/5/2008
- Biofuel production has pushed up feedstock prices. The price of maize (corn) rose
by over 60% from 2005 to 2007, largely because of the U.S. ethanol program.
"Biofuels: The Promises and the Risks", World Bank, 4/1/2008
- "Ethanol is the one thing we can do something about. It's about the only lever we
have to pull, but none of the politicians have the courage to pull the lever."
C. Ford Runge, University of Minnesota, quoted in "Fuel Choices,
Food Crises and Finger-Pointing" New York Times, 4/15/2008
- For the last 15 years, U.S. food prices have averaged a 2.5% increase each year.
In 2007, U.S. food prices rose 4% -- the highest increase since 1990 -- and are
expected to rise 6% in 2008.
USDA Economic Research Service
- Eggs have increased 28% from April 2007, milk jumped 21%, chicken rose 6% and beef
is up 8%.
Bureau of Labor Statistics Consumer Price Index Data
- The increasing ethanol production has had a significant impact on the national average
U.S. corn price.
"The Effect of Ethanol Production on the U.S. National Corn Price"
Fortenbery and Park, University of Wisconsin-Madison, Department of Agricultural
& Applied Economics, 4/2008
Studies, Testimony and Reports
Articles of Interest
|