Monday, January 17, 2011

Cost of Living

Ethanol and Food Prices: What Experts Say

Washington--Recent news stories about higher food prices often try to make a connection between food prices and the demand for ethanol, an incorrect assumption on the part of ethanol opponents that significantly downplays all the impacts and pressures that affect food prices, noted Bart Schott, president of the National Corn Growers Association, in a recent Ag Professional piece. Studies conducted after the 2008 spike in corn prices help demonstrate this, according to NCGA.

In an April 2009 Congressional Budget Office report, the agency estimated that from April 2007 to April 2008, the rise in the price of corn resulting from expanded production of ethanol contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices measured by the consumer price index. Over the same period, certain other factors—for example, higher energy costs—had a greater effect on food prices than did the use of ethanol as a motor fuel.

According to a January 2010 report for the United Kingdom’s Department for Environment, Food and Rural Affairs, “The impact of biofuels on the 2007/08 price spikes is often over-stated. Rather, the evidence suggests biofuels were one of the various drivers of demand in years leading up to the spike, but that many commentators are ascribing too much weight to biofuels as a trigger of the spike.”

The Agriculture Department is forecasting a 2 percent to 3 percent increase in the CPI for all food in 2011. Farm Bureau continues to monitor retail food price trends through its quarterly marketbasket surveys.

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