May 1, 2008

Food price rise is the result of more than just ethanol

WASHINGTON—Rising food costs in the United States and overseas are receiving a great deal of attention, and a range of complex factors are behind the phenomenon.

Corn-based ethanol is “not the culprit that American consumers are being led to believe,” said American Farm Bureau Federation President Bob Stallman at an April 30 news conference. “We want to make sure that America’s consumers have a clear picture of this volatile and very complicated food price situation.”

While U.S. farmers have taken some flak for increasing corn acreage as prices and demand for corn for ethanol climbed, “there’s a much bigger picture here, things that are way beyond farmers’ control,” noted Andrew Smith, senior assistant director of governmental relations for Virginia Farm Bureau Federation.

Jonah Bowles, VFBF agricultural risk management coordinator, concurred. “Nobody knows how a new quest is going to play out,” he said of how U.S. ethanol production has unfolded in recent years. As an alternative fuel, “it works, but it has consequences.”

Farm Bureau analysis of the costs of food production and marketing shows petroleum-based energy is the primary factor driving domestic food prices. Forty-four percent of rising food costs is due to energy costs, according to AFBF.

“After many commodities leave the farm gate, high costs for energy, fuel and transportation are added and passed onto the consumer,” Stallman said. “Increased retail prices can especially be seen on highly processed foods.”

In addition, AFBF cites several other issues contributing to food prices, including weather-related production shortfalls in grain-producing countries; economic development and income growth in emerging countries; and decisions by some countries to limit or curtail exports of rice and other products into the world market. Other contributing factors include higher transportation costs, the weak dollar and commodity speculation by outside investors.

At the same time, Farm Bureau officials note, ethanol as a fuel additive has served to limit gasoline price increases. And they cite recent reports that ethanol production is significantly more energy-efficient than it was five years ago.

It also has created jobs and additional household income and new tax revenues.

And, Smith noted, like all biofuels, it can make a difference in whether a farm stays in business. “If it’s not going to be growing something for biofuels or food, it’s going to be growing houses” if a farmer is forced to sell off land for development.

He added that ethanol is still the most viable substitute for gasoline oxygenate MTBE, which has been proven to contaminate water supplies and has been banned in several states.

“We’re not ever going to switch to all ethanol, but there’s a place for it,” Smith said.
Reducing dependence on foreign oil lies in changes to current technology and U.S. consumption habits, Bowles noted. “We’re not ever going to be completely independent, but we’re trying to be more self-sufficient. We have the potential to greatly reduce our dependence on foreign energy,” though the solution is not as simple as a farmer choosing to grow one crop over another.

“The solution to energy is everybody’s business. It is not a blame thing.”

Contact Smith at 804-290-1021; Bowles at 804-290-1117; or Tracy Taylor Grondine, 202-406-3642, or Anne Keller, 202-406-3659, AFBF.