Farm-to-Food Memo Pro or Con: Is the Overplanting of Ethanol Crops Responsible For Higher Food Prices?

Natural~Specialty Foods Memo Editor's Note: The current U.S. Federal Government program of providing farmers subsidies and other economic incentives to plant corn to be used to produce ethanol fuel is being hotly debated by the U.S. Congress, which on a bipartisan basis created these subsidies just a few years ago in partnership with President George W. Bush.

However, with the soaring cost of food in the U.S. and elsewhere, including everything made with corn, Congress and others in the U.S. are wondering if creating the economic incentives, which have resulted in a record ethanol corn crop this year, was such a good idea after all.



A number of U.S. Senators and members of the House of Representatives, Republican and Democrat alike, recently called for hearings to evaluate the nation's ethanol policy and the subsidies that are encouraging more corn crops to be planted for the fuel.

The vast majority of corn grown by U.S. farmers is still for food, feed and ingredient uses, but the type of corn grown for fuel is rapidly increasing.

Additionally, U.S. states ranging from mega-California with 38 million people, to farm-belt states like Illinois and Iowa, have passed laws which require gasoline refiners to mix a higher percentage of ethanol, which in the U.S. is made nearly 100% from corn, with petroleum-based gasoline in order to make what's called blended fuels for use in those states. Numerous other states have similar laws and policies.

The result of these laws and policies means even if the U.S. wants to stop offering subsidies to farmers who grow corn crops for fuel, it's going to have a hard time doing so because the demand, created by these mixed-fuel laws, is already in place--and growing. California for example will soon require refiners to add an even higher percentage of ethanol to the petroleum-based gasoline they sell to service stations in the Golden state.

It seems a policy--creating economic incentives for farmers to grow corn for fuel--had its intended results, which was to create more supply of the grain-based fuel in the U.S.

It also appears the policy has had unintended consequences as well, depending on who you talk to, reducing the total acreage previously used to grow corn for food, feed and ingredients, thus creating less supply, resulting in soaring commodity prices for food-grade corn and reduced surpluses in U.S. grain silos.

Point/Counterpoint

Pro: Corn-ethanol production is responsible for soaring food prices

David A. Ridenour is the vice president of the National Center for Public Policy Research, which describes itself as a conservative, free market organization. (http://www.ncppr.org/.

Mr. Ridenour argues the policies creating subsidies and economic incentives for farmers to grow corn for fuel, which many are, has resulted in today's soaring commodity price of corn, the increased costs of meat and poultry, which are fed primarily a corn-based diet, and numerous other foods which are either made from corn or have corn-based ingredients like sweeteners used to produce them.

Read David Ridenour's pro opinion that the growing of corn for fuel use is a leading cause of the current soaring prices for livestock and corn-based foods here.

Con: It's a misconception corn-ethanol is to blame

On the other hand, Bob Stallman,a rice and cattle producer from Texas and president of the American Farm Bureau Federation, says it's a misconception that increased use of corn for ethanol production is the key or only factor driving higher food prices. (http://www.fb.org/.

Read Bob Stallman's con opinion that the increased practice of growing corn crops for ethanol production is what's causing the food price hikes currently being experienced by consumers at the supermarket here.

Natural~Specialty Foods Memo Analysis

You can determine for yourself which of the two arguments made in the essay's above you agree more with.

Each writer makes some fairly strong arguments--and some weak ones as well--regarding his respective positions.

Texas Republican Senator Kay Bailey Hutchison last week called for the U.S. Senate to place a moratorium on the current subsidies and economic incentives the government gives to farmers for planting corn for ethanol production and a freeze on the amount of the fuel produced, until it can be determined if these programs--and the use of corn-based ethanol--are causing the soaring food prices for meats, poultry and foods produced using corn

President Bush, who Senator Hutchison was and is a big supporter of, disagrees with her move to have the Senate consider this plan. Rather, he says ethanol production from corn is a key part of his administration's plan to produce more fuel from sources other than imported oil.

Both Bush and most others--although some corn-belt Republicans and Democrats are silent on the issue--say the long-term goal is to produce ethanol in the U.S. using raw materials like switchgrass, which is a non food-use crop.

However, scientists working on the switchgrass-to-ethanol fuel concept (called cellulosic ethanol) say it will be a number of years before it can be done in any meaningful and plentiful manner.

These researchers and many others also argue the Bush Administration and Congress has allocated nowhere near enough money to fund such research, especially if they want like they say to have switchgrass-to-ethanol technology be able to come on-line anytime soon.

Many of these switchgrass advocates say some of the money currently being used to subsidies farmers to grow more corn for ethanol, should be used to fund the research into switchgrass-to-ethanol technology.

Nearly everybody in the debate agrees corn is merely a short-term solution in producing ethanol; that it's far from the best crop to use to produce the fuel.

Meanwhile, the per-barrel cost of oil seems to increase daily, sitting at about $130 barrel today. This fact, along with $4 a gallon gasoline at the pump and soaring food prices in the U.S., makes the ethanol debate even hotter.

Most experts on the U.S. Congress are saying they don't believe the legislators will touch the current corn-for-ethanol subsidies and economic incentives like Senator Hutchison is suggesting it does. There are too many Democrat and Republican farm state legislators to let that happen.

Additionally, since President Bush apposes any such move, he would veto any legislation in that regard anyway, say the Congressional watchers.

This issue is only going to get hotter, since very few people believe the prices of food, oil and gasoline is going to stop increasing for the rest of the year and into 2009.

This also is a Presidential and Congressional election year in the U.S. Congress is currently on recess for the Memorial Day holiday in the U.S., a time when most of the members go back to their respective districts to attend holiday events and talk with constituents.

You can bet the members will be getting an earful about the perfect economic storm consumers are facing. That perfect storm being a combination of soaring food costs, coupled with never-ending increases of the price of gasoline at the pump, and an overall sluggish and uncertain economy on main street.

Illustration Credit: The illustration at the top of this piece depicting the gas pumps growing side-by-side in a corn field is by Anita Langemach, courtesy of The Gazette, Colrado Springs, Colorado.