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There’s a lot of finger pointing and they seem to be pointing at ethanol as the cause for high food prices. But acording to a recent Texas A&M report, ethanol has a relatively insignificant role in global food prices. Keep reading and maybe you’ll discover that biofuels are not the problem, but they are the solution instead! Learn more about ethanol and gas prices.

Farmers’ Fair Price
Is Small Potatoes
For decades, American farmers have worked and invested their own money to create a renewable fuels market that both addresses our nation’s growing need for energy and keeps American agriculture as the world’s leader. Farmers also invested this time and money anticipating it would lead to a fair market price for their corn and soybeans, which it recently has. It has led to not only ethanol plants paying a higher price for corn, but also food companies.

Ethanol & Corn Prices
A study completed at University of Wisconsin by Fortenbery and Park suggests ethanol demand has increased corn prices by only 41¢ per bushel over levels that would have otherwise existed. As it is, corn prices have actually increased by $1.22 over the same period studied by the Wisconsin researchers, suggesting other factors are contributing to higher commodity prices. Exports also have increased corn prices, but the Wisconsin researchers suggest a significant effect coming from speculative trading by outside investors.

Wait, how can the price of corn go up but not affect the price of food all that much? The value farmers receive for their crops and livestock make up only 20% of the food dollar. Much more goes into your food at the grocery store:

Labor, 40%
Transportation, 5%
Packaging, 6%
Profits for processors, retailers and restaurants, 4%
Other marketing costs, 20-25%

Not only are there many factors in food price, but all of them have increased in price, not just the raw commodity. Illinois Farm Bureau President Philip Nelson said, “In this entire food price discussion, many intelligent people have failed to recognize that there’s very little correlation between commodity prices and food prices. Let’s put this into its proper perspective: A gallon of milk that used to contain about 6¢ of corn (at $2 per bushel corn) now contains about 18¢ worth of corn at today’s prices.”

Ethanol Corn Isn’t Corn on the Cob
How do you blame ethanol for higher apple prices? Orchards aren’t being chopped down to plant corn for ethanol.

Believe it or not, the same thing can be said for corn. There are two kinds of corn, the kind you eat on the cob and a kind called #2 yellow dent corn. Less than 10% of the corn grown in the U.S. is used for food, and it isn’t being replaced with the yellow dent corn. In other words, corn used for ethanol is not replacing corn grown for food.

Useful Links
General Motors Supports Biofuels
Renewable Fuels Association