Friday, April 17, 2009

Ethanol Economics

Congressional Budget Office: Ethanol not Big Factor in Food Prices

WASHINGTON-- American Farm Bureau Federation President Bob Stallman said that the latest government statistics prove ethanol played only a minimal role in last year’s food price increases. During a call today with reporters, Stallman said a Congressional Budget Office report released last week proved that higher energy costs have a greater effect on food prices than the use of renewable ethanol fuel. Stallman was joined on the call by several other agriculture and energy organizations.

“These results of the CBO report came as no surprise to Farm Bureau,” said Stallman. “With so many fingers in the till between the farmer and consumer, there are numerous factors responsible for higher food prices, including labor expenses, energy costs, financial speculation, increased demand, weather production losses and the weak U.S. dollar.”

According to the Agriculture Department, farmers receive less than two dimes out of every dollar spent for food in the United States. Eighty percent of the costs of food, including processing, transportation, packaging, distribution and retailing are all added after the commodity leaves the farm.

“In order to find out what causes higher food prices, a close examination of all the components of the food price dollar is necessary,” said Stallman, who said
AFBF has called for hearings looking into all the reasons food prices increased last year. “It is disingenuous to only look at farm prices.”

Stallman said the CBO report estimates that from April 2007 to April 2008, food prices increased by about 5.1 percent. Corn prices from expanded ethanol production only contributed between 0.5 and 0.8 of a percentage point of that amount.

“Now, in spite of the tumbling price of oil and significant decreases in corn and other commodity prices, the Bureau of Labor Statistics reports the cost of food has still risen 4.3 percent during the last year,” said Stallman.

Overall, Stallman said there are many benefits to using ethanol. Aside from cutting greenhouse gas emissions, the use of ethanol is replacing 11 billion gallons of gasoline, the equivalent of about 7 percent of fuel use, thus reducing our dependence on foreign sources of oil.

Other organizations participating in today’s media call included the National Corn Growers Association, the National Farmers Union and Growth Energy.

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