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Energy Has More Impact On Food Prices Than Ethanol

posted on April 17, 2009


Hello, I'm Mark Pearson. An unexpected drop last month in sales of everything from cars to clothing revealed, despite glimmers of hope, the U.S. economy still is vulnerable.

According to the Commerce Department, retail sales fell 1.1 percent in March, marking their largest decline in three months.

A big drop in auto sales led the overall slump in demand, but sales also plunged at clothing stores, appliance outlets and furniture stores, as consumers coped with a deteriorating labor market.

The economy lost a net total of 663,000 jobs last month, pushing the unemployment rate to 8.5 percent… its highest level in 25 years.

Meanwhile, new housing starts fell more than 10 percent in March to a seasonally adjusted figure of 510,000 units… the lowest tally in 50 years.

And RealtyTrac, a foreclosure listing firm reports nearly 804,000 U.S. homeowners received at least one foreclosure-related notice in the first quarter of 2009…up 24 percent from the same period last year.

While this week's economic reports were all negative, a study released late last week, was friendly to the American ethanol industry. But that's not to say the report wasn't cited by ethanol critics as well.

Energy Has More Impact On Food Prices Than Ethanol

The study was conducted by the non-partisan Congressional Budget Office or CBO. According to the report, ethanol was responsible for a mere eight-tenths of one percent of last year's 5.1 percent increase in retail food prices. Closer examination of the data revealed energy costs, which were on their way to record highs, were more to blame for higher food prices between April 2007 and April 2008.

In addition to the limited increase in cost, the report shows ethanol reduced gasoline use by 4 percent and greenhouse gasses by 1 percent.

On news of the report, Growth Energy, an ethanol promotion group, held a teleconference to call attention to the results.

Tom Buis, CEO, Growth Energy: "The rapid increase in food prices was not a result of ethanol or farm commodity prices."

Tom Buis, CEO, Growth Energy: "I think the facts speak for themselves. So to blame us for something that wasn't our fault was really trying to point the finger at the other guy and maybe escape scrutiny themselves. You know, food prices, and many of the big companies, had record quarterly profits during that period."

Other groups joining to proclaim that farmers were ready to produce the corn necessary to satisfy America's food, feed, and fuel needs were the National Farmers Union, the National Corn Growers Association, and the American Farm Bureau Federation.

Bob Stallman, President, American Farm Bureau, Federation, "One thing about ethanol is it creates an entirely new industry and at the same time allows producers to have a new market for which they will increase production to supply. That's the case it's always been with farmers."

Long time ethanol opponents claimed the report was just more support of their case. Among those saying ethanol is responsible for increased costs were members of the American Meat Institute, the National Turkey Federation and the Grocery Manufactures Association.

Scott Openshaw, Grocery Manufacturers "We're encouraging Congress to revisit current federal food to fuel policies and to, instead, focus their attention on promotion of the research, development, and rapid deployment of true second generation biofuels that do not pit our nation's energy needs against our nation's food and feed needs."

The CBO study revealed ethanol production will increase the cost of federal programs like the Supplemental Nutrition Assistance Program, or SNAP, formerly known as Food Stamps. According to the CBO 12-18 percent of the $5 billion increase in SNAP's 2009 budget can be attributed to ethanol...about the same as its impact food prices.

And the authors of the report added the warning that if land not currently in production was converted to grow more corn it would offset any reduction in greenhouse gasses provided by ethanol.

 


Tags: biofuels ethanol food news renewable fuels