Farm Industry News Blog

Ethanol should not shoulder blame for higher food prices, Informa suggests

Informa Economics released a report this week examining corn, commodity and consumer food prices. The report indicates that several factors are behind higher food costs.

 

The argument that ethanol is the main culprit behind higher food prices does not wash, according to a report released this week by Informa Economics. “There is little evidence of such a simplistic cause-and-effect linkage,” reports Informa in Analysis of Corn, Commodity, and Consumer Food Prices. The executive summary, which was prepared for the Renewable Fuels Foundation, can be found at www.ethanolrfa.org.

 

Corn prices have a relatively weak correlation with food prices because the farm share is a small portion of the overall retail food dollar, reports Informa, adding that corn is only a portion of the farm value for many products.

 

Prices for other components in the marketing bill (the part of our food dollar not related to the farm value of raw materials) have also been increasing. This, plus inflation, has impacted food prices, Informa reports.

 

Informa reports there were “relatively weak correlations” between corn prices and livestock, poultry, egg and milk prices. “With these low correlations, it is statistically unsupported to suggest that high and/or rising corn prices are the only or even the main reason behind high and rising retail meat, egg and milk product prices.”

 

“The upward trend in cattle, hog and poultry prices began in the late 1990s, well before the corn price began to increase significantly,” Informa continues.

 

Chicken Council weighs in

Meanwhile, Bill Roenigk, senior vice president and chief economist for the National Chicken Council (NCC), reported this week that “Raising poultry and livestock as food for people is taking second place to putting ethanol derived from corn into America’s gasoline tanks.”

 

The NCC (www.nationalchickencouncil.com) pointed to this week’s report from USDA’s World Agricultural Supply and Demand Estimates. The NCC reports that USDA forecasts 5 billion bushels of corn will be used for feed and related purposes while 5.05 billion bushels will be used for ethanol and byproducts for the 2010/2011 crop year. The report marks the first time that ethanol usage will exceed feed usage, Roenigk said.

 

Government mandates for ethanol have contributed to “the skyrocketing cost of corn,” the NCC stated. The WASDE accounts for the fact that ethanol produces dried distillers grains with solubles (DDGS) which can be used in livestock and poultry feed, but the NCC argues that it lacks the nutritional and energy values of corn.

 

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