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Farm Foundation, July 2008
Farm Foundation commissioned the report to provide an objective context for interpreting the rapidly growing literature on the forces driving food prices. The report discusses key drivers, including commodity supply and demand shocks, trade and exchange rates and biofuels. An annotated bibliography of recent literature is also included in the report.
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John Urbanchuk (TV Interview), LECG, July 2008
John Urbanchuk, an economist and director of the Agriculture and Biofuels Practice at the global consulting firm LECG, LLC, explains why ethanol is helping reduce the overall price of gasoline. Urbanchuk gives his short-term outlook for energy and food prices and discusses the impact an RFS waiver would have on food and corn prices. He also explains why removing, or decreasing the ethanol import tariff could be damaging to U.S. industry.
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Renewable Fuels Association (RFA), July 2008
The persistence of oil prices well in excess of $120 per barrel is having a far greater impact on corn prices than is the growing production and use of biofuels like ethanol. According to professors at Purdue University, as oil prices have soared from $40 per barrel to $120 per barrel, it has led to a $3 increase in the price of corn over that time period. Converesely, the growth in ethanol production and use in the US specifically has accounted for just $1 in the rise in corn prices.
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John Urbanchuk, LECG, July 2008
In early April 2008, Dr. Donald Mitchell, Lead Economist in the Development Prospects Group of the World Bank, prepared a draft working paper that examined the sharp increase in global
food prices between January 2002 and February 2008 and attempted to identify causal factors for
the increase. The report was intended solely for use within the Bank and was not authorized for citation or circulation.
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Renewable Fuels Association (RFA), June 2008
Ethanol, America’s homegrown renewable fuel is reducing America’s dependence on increasingly unaffordable oil imported from the Middle East and elsewhere. According to the Energy Information Administration, U.S. ethanol production is cutting over 140,000 barrels a day of foreign oil imports. That’s over $6.6 billion a year that’s staying here at home and not lining the pockets of OPEC and other foreign oil producers.
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Renewable Fuels Association (RFA)/Merrill Lynch, June 2008
According to a new analysis by Merrill Lynch Commodity Strategist Francisco Blanch, “retail gasoline prices would be $21/bbl higher, on average, without the incremental biofuel supply.” This translates to a $526 a year savings on gasoline for the average family.
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Bob Dinneen, Renewable Fuels Association (RFA), June 2008
Although the Grocery Manufacturers of America (GMA) are conducting a concerted propaganda effort to convince the public and policymakers that biofuels are major cause of higher world food prices, the most important factors that are primarily responsible for driving up food costs are skyrocketing oil prices, droughts and adverse weather in Australia, China and other regions, increasing middle class demand for meat and grain in emerging economies, commodity speculation, and declining value of the dollar.
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Iowa Renewable Fuels Association, June 2008
Biofuels protect the family budget. If biofuels production were rolled back, the typical family of four would lose roughly $1,000 in purchasing power – for groceries, gasoline, etc. The Iowa Renewable Fuels Association has prepared a food and fuel fact sheet.
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Iowa Corn Promotion Board, June 2008
There is only 13 cents of corn in a gallon of milk, and just 11 cents of corn can be found in your morning cereal. The Iowa Corn Promotion Board lays out its Kernels of Truth campaign and presents resources for battling food versus fuel propaganda.
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U.S. Senator Chuck Grassley, May 2008
Senator Charles Grassley says, “It seems there is a “group-think” mentality when it comes to scapegoating ethanol for everything from high gas prices, global food shortages, global warming and deforestation. But, as was recently reported, this anti-ethanol campaign is not a coincidence. It turns out that a $300,000, six-month retainer of a beltway public relations firm is behind the smear campaign, hired by the Grocery Manufacturers Association.” (Links to Grocery Manufacturers Association’s request for the smear campaign and the PR firm’s proposal are also included.)
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National Biodiesel Board (NBB), May 2008
Several U.S. Senators have stated that the Grocery Manufacturers Association’s attempts to blame biofuels for food price increases are not based on sound science, sound economics, or common sense. The senators expressed strong support for continued federal programs that encourage biofuel production and use.
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University of Nebraska Lincoln, May 2008
Despite some of the myths popularized by food versus fuel smear campaigns, the University of Nebraska estimates that ethanol’s increasing demand for corn is only responsible for about 1.2 percent of the increase in U.S. food prices.
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Renewable Fuels Association, May 2008
Responding to the inside-the-beltway ethanol smear campaign organized by the Grocery
Manufacturers of America (GMA) and other undisclosed funders, Renewable Fuels Association President Bob Dinneen says, “These groups have chosen to deliberately mask the devastating impact of skyrocketing oil, gasoline and diesel prices while fostering a climate conducive to rampant speculation that has driven all commodities higher. Everyone ought to be asking why.”
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Ed Schafer, U.S. Department of Agriculture (USDA), May 2008
U.S. Secretary of Agriculture Ed Schafer says, “For food products, higher oil prices mean higher costs of transportation, processing, packaging and distribution, and all the other intermediary steps that bring commodities form the farm gate to the retail store. Those steps account for approximately 80 cents of every retail dollar that is spent on food here in the United States.”
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Presentation located here.
Congressional Research Service (CRS), May 2008
Several international organizations have announced that the sharply rising commodity prices are likely to have dire consequences for the world’s vulnerable populations, particularly in import-dependent, less developed nations. In the United States, high commodity prices have pushed farm income to successive annual records and have sharply lowered government farm program costs, but they have also stoked the flames of food price inflation and have raised costs for livestock producers and food processors. This report examines the causes, consequences, and outlook for prices of the major U.S. program crops, and provides references for more detailed information.
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American Coalition for Ethanol (ACE)
Ethanol is not driving up the price of food, and ethanol is lowering gas prices. Sweet corn, the type of corn eaten by people, is not used to make ethanol. Only field corn, the type of corn eaten by animals, is used for ethanol production. Ethanol does not take food away from the hungry. The American Coalition for Ethanol has prepared more talking points.
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Iowa Corn Growers’ Kernels of Truth
Only 19 cents of your food dollar goes back to Iowa’s farmers. The remaining 80 cents is spent on packaging, energy, transportation, and marketing. Corn plays an important, but small role in the price you see in the checkout lane. Iowa Corn has prepared more facts.
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National Corn Growers Association (NCGA), Resource Center
U.S. corn growers are proud to work hard and be able to meet the demand for corn for food, feed, fuel and fiber. They’re also proud of the important role corn ethanol plays in reducing our nation’s dependence on foreign oil, in helping protect the environment and in boosting our nation’s economy. The National Corn Growers Association has prepared a resource center.
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U.S. Department of Agriculture (USDA), Economic Research Service, May 2008
Although the food commodity index has risen more than 60 percent in the last 2 years, the index for all commodities has also risen 60 percent and the index for crude oil has risen even more. Since mid-1999, when all three indices were at about the same level (and were about where they had been 10 years earlier), food commodity prices have risen 98 percent (as of March 2008); the index for all commodities has risen 286 percent; and the index for crude oil has risen 547 percent.
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Timothy Kaine, Virginia Governor, April 2008
Virginia Governor Timothy Kaine says, “Petitioning the EPA for a temporary biofuel waiver will not have a meaningful impact on food prices or crop planting decisions of Virginia farmers. Virginia, and the United States, would be much better served by taking actions to reduce demand for petroleum, natural gas and other energy through increased energy efficiency in our vehicles, homes and businesses…Providing for a temporary waiver of the renewable fuels mandate would not have a substantive effect on the cost of food stocks.”
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Texas A&M Study, April 2008
Important food items like bread, eggs, and milk have high prices that are largely unrelated to ethanol or corn prices, but correspond to fundamental supply/demand relationships in the world. Relaxing the RFS does not result in significantly lower corn prices. This is due to the ethanol infrastructure already in place and the generally positive economics for the industry. The ethanol industry has grown in excess of the RFS, indicating that relaxing the standard would not cause a contraction in the industry.
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National Biodiesel Board (NBB), April 2008
The growth of the biodiesel industry in the U.S. leads to higher production of lower cost food protein. Biodiesel has primarily been made from the byproduct oil of growing soybeans, with the remaining 80 percent of the bean being protein meal. Higher demand for the oil leads to lower cost protein meal, used to feed livestock, as well as for human consumption.
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ProExporter, Biofuels and the Price of Rice, April 2008
U.S. farmers intended to plant only 9,000 more acres of rice in the 08-09 crop year. Thus the area of rice would not change much this Spring from last year’s 2.76 million acres, which was down from the previous year’s 2.84 million acres. I could see from the last decade that US rice area had almost always been at or above 3.00 million acres. This is not a direct result of increased corn production for ethanol.
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Rick Tolman, National Corn Growers Association (NCGA)
Hey kids! Looking for a quick and easy way to deceive the public about the price of food while trying to limit exposure on the core issue of transportation costs? Want to confuse consumers and spread outlandish lies? You can do this and more in just five easy steps. The National Corn Growers Association satires the food and fuel smear campaign.
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Richard Perrin, University of Nebraska-Lincoln, April 2008
Rising corn prices will not contribute much to higher food prices. A 40 percent increase in corn price will ultimately be passed on as a 40 percent increase in just 3.2 percent of the cost of food – a final food cost increase of about 1.3 percent.
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Renewable Fuels Association (RFA), Food versus Fuel Facts
While the case can be made that expanded ethanol production is a minor factor in increased spending on food, additional food spending increases are more than offset by savings resulting from the inclusion of more ethanol in the U.S. gasoline supply. The average U.S. household saved between $100.44 and $510.72 between March 2007 and March 2008 as a result of increasing ethanol production.
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Renewable Fuels Association (RFA), Food Price Resources
The primary factors contributing to rising food prices include skyrocketing oil prices, surging global demand for grain and meat from nations like China and India, hedge fund speculation on commodity markets, droughts in Australia and elsewhere, a weak dollar encouraging exports, and agricultural policies around the world that have limited the productivity of farmers from Europe to Asia.
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National Farmers Union (NFU), Food and Fuel Facts
U.S. consumers enjoy the most affordable and abundant food supply in the world despite an increase in corn demand for ethanol production. The price of corn and other grains play a minor role in food cost. Oil prices are a greater factor in rising food prices since fuel contributes to the cost of food at every step – growing, processing, packaging and shipping. According to USDA, non-farm costs account for 80 percent of every food dollar spent in the United States.
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The Wall Street Journal, March 2008
Merrill Lynch Commodity Strategist Francisco Blanch says that without biofuels, oil prices would be even higher than they are now. He says that oil and gasoline prices would be about 15 percent higher if biofuel producers weren't increasing their output.
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Renewable Fuels Association (RFA), Expert Comments
Experts say ethanol critics in the food versus fuel debate are “flat out wrong”, have a “gross misunderstanding” and are “shockingly misinformed”.
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Ed Schafer, U.S. Department of Agriculture (USDA), April 2008
Only about 25 percent of the corn crop goes to make ethanol and the forces driving rising prices in corn and other commodities have more to do with energy costs, increased consumption around the world and weather-related production problems.
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Thai Prime Minister Samak Sundaravej, April 2008
Thai Prime Minister Samak Sundaravej has criticized the World Bank and the United Nations for blaming biofuel producing nations for soaring food prices while sparing oil exporters.
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Brent Searle, Oregon Department of Agriculture, April 2008
The impact of farm gate commodity prices on final retail prices is dampened by the fact that 80 percent of the retail grocery cost is added after the food leaves the farm. A standard box of cornflakes contains approximately 10 ounces of corn. Even when corn is priced at $4 per bushel, a box of cornflakes contains less than a nickel’s worth of corn. A can of soda contains less than 2 cents worth of corn sweetener.
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Bill Doyle, Potash Corp., April 2008
Government policies spurring biofuel production are not to blame for grain shortages and food inflation, said the chief executive of Potash Corp, the world's largest fertilizer company. He says demand for meat and other food from Asia's growing middle class combined with a depletion of world stocks are the major factors behind rising food prices.
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National Corn Growers Association (NCGA), Get the Facts, December 2007
Grocery-store shoppers and restaurant diners need to understand that the cost of food ingredients in products they buy represents less than one-fifth of the price at checkout. Only 19 cents on every dollar spent goes back to the farm. Other factors, especially ones that are energy-related and therefore often petroleum-dependent, have greater impact.
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National Corn Growers Association (NCGA), Ethanol Myths
There is not only enough corn for all demands – food, feed, fuel and fiber – but more than enough. Estimated U.S. corn surplus for 2007 (the amount left over after all needs are filled) is projected at 1.8 billion bushels, well above the 20-year average and is the fifth-highest level in the last two decades. The National Corn Growers Association has prepared responses to several other myths about corn and ethanol.
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Informa Economics Study for Renewable Fuels Foundation, November 2007
The “farm value” of commodity raw materials used in foods accounts for 19 percent of total U.S. food costs, a proportion that has declined significantly from 37 percent in 1973. For food products where corn is only one of several farm-produced inputs, the proportion of the total product cost attributable to the cost of corn is even less than 19 percent. The remaining portion of total retail food costs is known as the marketing bill. The marketing bill includes the costs of labor, packaging, transportation, energy, profits, advertising, depreciation, rent, interest, repairs, business taxes and other costs not attributable to basic agricultural commodities.
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National Corn Growers Association, Food and Fuel Talking Points
The Center for Agricultural and Rural Development researchers have estimated that across all foods consumed, 30 percent higher corn prices would increase all average food prices by just 1.1 percent. The National Corn Growers Association has prepared more talking points.
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Iowa State University, Center for Agricultural and Rural Development (CARD)
In a recent study, CARD researchers estimated that a 30 percent increase in the price of corn, and associated increases in the prices of wheat and soybeans, would increase egg prices by 8.1 percent, poultry prices by 5.1 percent, pork prices by 4.5 percent, beef prices by 4.1 percent, and milk prices by 2.7 percent. For all food consumed at home, average prices would increase by 1.3 percent. For food consumed away from home, average prices were estimated to increase by 0.9 percent. So, across all food consumed, 30 percent higher corn prices increase all average food prices by 1.1 percent.
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Consumer Federation of America (CFA), July 2007
Record gas prices have inevitably led to record profits for Big Oil. Consumers may be a bit surprised to find out that the primary cause of the huge run up in gasoline prices is not OPEC or the price of crude oil, but a shortage of refinery capacity to produce gasoline and other fuels. They may also be taken aback by the brazen attempt of the oil industry to prevent policymakers in Washington from doing anything about the problem. Having systematically failed to increase their refining capacity to meet growing and expected demand, the major oil companies have now declared war on a key policy that can help alleviate the shortage – the expanded production of alternative transportation fuels, particularly biofuels, like ethanol.
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National Corn Growers Association (NCGA), Understanding Price Impact, April 2007
If current corn prices prove to be temporary and prices recede to the $2.75-3.00 per bushel level, there would be little or no impact on consumer food prices. This could be a very real scenario with a significant increase in 2007 corn acres planted, normal weather, and trend or above-trend yields. If prices receded and were sustained in the $3.00-3.50 per bushel level, slight price increases to certain consumer food items might occur, but would likely be unnoticeable to the consumer.
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National Corn Growers Association (NCGA), Mexican Tortillas
In recent months, numerous media reports have suggested higher yellow corn prices and increased ethanol production in the United States are driving tortilla prices higher in Mexico. It’s easy to see how an isolated view of the circumstances might lead to the conclusion that U.S. yellow corn prices and Mexican tortilla prices are fundamentally linked. However, Mexican tortillas are principally made from Mexican-raised white corn. White corn typically accounts for less than 1 percent of corn production in the United States, with yellow corn constituting the bulk of U.S. production.
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Sacramento Bee, Milk Pricing, June 2007
Corn is a staple feed on large dairy farms, and it is about 35 percent more expensive this year than last, largely due to the demand from new ethanol plants. But feed costs are not part of the formula that determines the price of milk, so there's no direct way for dairy farmers to pass on their costs to bottlers and consumers.
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Federal Reserve Bank of Kansas City, 2008
Marketing costs have risen sharply over the past 50 years, consuming a greater share of the retail food dollar. In 1950, marketing costs (the difference between the farm value and consumer spending for food at grocery stores and restaurants) accounted for 59 percent of total retail food costs. Over the past three decades, rising labor and energy costs have boosted that share steadily, from 67 percent in the 1970s to 80 percent today.
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Food and Water Watch, September 2007
At least three case studies support the idea that retail grocery prices are insensitive or unresponsive to the cost of corn that is used to produce them. In one example, corn prices rose three times faster than retail grocery prices. In two other examples, farmgate corn prices fell sharply, but most retail meat and milk prices grew modestly. This suggests that meat and milk producers are operating a sticky pricing scheme which allows prices to drift up when input costs rise but do not pass on savings to consumers when the costs of inputs fall.
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John Urbanchuk, Corn and Energy Prices in the Grocery Aisle, June 2007
Increasing petroleum prices have about twice the impact on consumer food prices as equivalent increases in corn prices. A 33 percent increase in crude oil prices – the equivalent of $1.00 per gallon over current levels of retail gasoline prices – would increase retail food prices measured by the CPI for food by 0.6 to 0.9 percent. An equivalent increase in corn prices – about $1.00 per bushel over current levels – would increase consumer food prices only 0.3 percent.
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Ethanol Across America, Summer 2007
The U.S. Commerce Department Consumer Price Index (CPI) released in April 2007 shows that from January 2006 to March 2007, a timeframe when corn prices nearly doubled, consumer food costs increased by less than average: 2.1 percent compared to the 25-year average of 2.9 percent.
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American Farm Bureau Federation, Food versus Fuel Rhetoric
An article done in conjunction with the Food and Agriculture Policy Research Institute (FAPRI) showed little impact from ethanol on food prices in 2006 and 2007 and then a 0.2 percent rise in the food CPI price index 2008. In 2009, the food CPI would rise 0.5 percent and then the next three years the food CPI would be 0.7 percent higher then would otherwise be the case.
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National Corn Growers Association (NCGA), Producing Food and Fuel
Demand for corn is at an all-time high, due in large part to the rapid increase in corn-based ethanol production. But what is often overlooked is the fact that supply is keeping adequate pace with demand. In response to heightened demand, U.S. growers have produced the four largest corn crops in history in the past four years. Annual production averaged 10.89 billion bushels from 2003/2004 to 2006/2007, compared with an average of 9.45 billion bushels in the previous four crop years. Simply put, though the market may experience more volatility as demand rapidly increases, there is no shortage of corn.
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Ethanol Today, March 2007
For the average American consumer, the change in the food bill may eventually rise ten dollars a year, but others argue that lower fuel costs and decreased government outlays (read taxes) for farm support will leave the consumer in a neutral-to-positive position economically. The cost of raising commodity corn happens at the front end, and as the corn moves up the supply chain, costs for transportation, processing and packaging, labor, overhead, other inputs, ingredients, storage, advertising, and marketing each add to the cost and ultimately make up the majority of the retail price.
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Brian Jennings, American Coalition for Ethanol (ACE), February 2007
Critics routinely overstate how much corn is actually consumed as human food. Historically, corn’s top customers are - in order - the livestock sector, exports, and processors (including ethanol), leaving a small fraction of each year’s crop for other uses, such as human food. As ethanol demands more corn, exports will decline, enabling supplies to reliably meet the needs of livestock and ethanol producers at home and preventing a disruption in the small percentage of corn needed for food.
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Brian Jennings, American Coalition for Ethanol (ACE), March 2007
Some says there’s too much ethanol. Others say they’ll never be enough. As ethanol gains popularity, those with extreme points of view will continue to make reckless charges questioning ethanol’s benefits. American Coalition for Ethanol Executive Vice President Brian Jennings discusses some of the flaws of extremist biofuel positions.
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Iowa Corn Growers Association (ICGA), Kernels of Truth Presentation
Much of the price increase in food has come in areas with no link to corn (fresh produce). In most foods, the amount of corn is too low to contribute more than a penny to costs. Even in products that use a lot of corn, its role in price is minor. Iowa Corn offers facts in a powerpoint presentation.
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North Dakota Agriculture Commissioner, August 2007
The principal reason for the rising cost of food was and is record oil prices, much of it imported. It is the increased cost of petroleum, not corn, that is driving up the cost of the average grocery bill food to the tune of $10 per week.
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