Report reveals farmers, ethanol not to blame for high food prices

SALEM, Ohio — American farmers deserve an apology, and leaders of the American Farm Bureau, National Farmers Union, National Corn Growers Association and Growth Energy are calling on Congress to make sure that happens.

The demand comes on the heels of a government report issued earlier this month that admits American farmers and the still-blossoming ethanol economy played only a small part in pushing Americans’ grocery bills higher over the past year — in fact, a far smaller role than originally accused.

Federal report

The report, issued by the Congressional Budget Office in early April, revealed higher energy costs across the board had a greater effect on food pricing hikes than the use of the U.S. corn crop for ethanol.

“The results come as no surprise to us, as we have been saying that ethanol’s role in food price increases is minimal,” said American Farm Bureau Federation President Bob 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.”

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

Not food vs. fuel

“There is no food versus fuel issue. This is a expensive, clever, contrived campaign that was designed to shift blame to farmers and also take our eye off the ball in reducing our need for imported energy,” said Rick Tollman, CEO of the National Corn Growers Association.

Tollman said American farmers have used technology to double corn yields over the past 30 years, and that food versus fuel advocates don’t take into account those increases in making their arguments.

“There is no food versus fuel issue.”

Rick Tollman

National Corn Growers Association CEO

“If you take more of the pie for ethanol, there’s less available for food. The reality is the pie is getting bigger and bigger, so we can do both. It’s not a zero-sum game.”

“And if you take the 10 to 15 percent of the food increase that is blamed on ethanol, that still means 85-90 percent did not come from it. Where did that come from, and why was there so much focus on the small piece that came from corn and ethanol?”

Now, for the real reason

Food prices continue to climb despite falling farmgate commodity and gasoline prices, pointing to a whole other set of circumstances that need explained not only to farmers, but also the American public, the ag group representatives say.

The coalition of ag industry groups is now asking Congress to hold hearings to figure out — and spell out — the real factors behind climbing food costs.

“It is disingenuous to only look at farm prices,” Stallman said, noting USDA figures show farmers receive only 19 cents 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.

“Several hearings [held before Congress] last year were designed to blame us for the higher food prices, and I would still like to see those same committees hold hearings again and get to the bottom of this,” said Tom Buis, CEO of Growth Energy, a coalition that supports green energy. Buis is also former president of the National Farmers Union.

“Someone out there did a well-organized, well-financed campaign, to blame the higher food prices on ethanol and farmers. I think they owe us a public apology.”

What goes up …

During a conference call last week, the leaders stressed that their issue is not with livestock producers, but instead with food manufacturers.

Recently, some large grocery store chains like Safeway and Supervalu have challenged big food manufacturers to justify their price increases or risk shelf space for their products.

A recent Los Angeles Times article observed, “One large grocery company operating in southern California has seen the wholesale price for a carton of Kellogg’s Corn Pops rise about 17 percent since June — despite a 52 percent plunge in corn prices from their peak that month.”

Next time

For future reports, the leaders advocated the CBO use the net use of corn for ethanol production, not the gross use, since one of the co-products of ethanol production, distiller grains, is used as part of livestock feed and replaces approximately 30 percent of the corn used for ethanol.

Examining the net use of corn for ethanol production would show ethanol production is an even smaller fraction of the rise in the rate of food prices, they claim.

The groups also urged the CBO to calculate the overall benefits of ethanol production to the government and consumers, especially in helping to reduce federal farm subsidy payments and in saving consumers at the gas pump.

Lastly, the groups asked CBO to use the most recent data on the carbon footprint of ethanol. The latest research published in the Yale Journal of Industrial Ecology shows ethanol reduces greenhouse gas emissions by up to 59 percent compared to gasoline.

Thank a farmer

The ag group representatives were also quick to point out that ethanol use also cut the nation’s gasoline consumption by about 4 percent over the past year, replacing 11 billion gallons of fuel, which actually saved American consumers money.

Current National Farmers Union President Roger Johnson said figures show blending ethanol into gasoline has resulted in a 34 cent per gallon decrease in the price at the pump. That savings, even when coupled with higher food spending at the grocery store and for federal nutrition programs, has translated into an actual benefit to consumers, he said.

“What it really says is that for every $1 of increased food cost, we as consumers saved from $5-8 at the pump.

“That’s a pretty good investment. I don’t know of a business or farmer in America that says they wouldn’t put in $1 to get $5-$8 back. That’s what ethanol has done for our entire economy and an important element that needs to be included.”

“To blame higher corn prices from ethanol on farmers is just flat wrong.”

Currently about a quarter of all corn grown in the U.S. — about 3 billion bushels in 2008 — is used to produce ethanol, according to the report.

About the Author

Former staff reporter Andrea Zippay wrote for Farm and Dairy from 2001 to 2009. More Stories by Andrea Zippay

One Comment

  1. george mudgett says:

    Don’t feel bad farmers,when your not getting blamed for the rising prices of food because the buyer or manufacturer buying your product had to pay you another ten cents a hundred or bushel,we the truckers are to blame because they had to pay us an extra hundred dollars on a cross-country load.The retailers,manufacturers,and middlemen can always find one of us to blame when they want to raise the price of their products.As always,the ones that do the most get paid least.

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