Ethanol and food prices

As has been noted previously , http://lthforum.com/bb/viewtopic.php?t=12226&highlight=ethanol the increased use of ethanol derived from corn is having an impact on food prices.

Here's an article on an investment web site which discusses some of the impacts: http://articles.moneycentral.msn.com/Investing/JubaksJournal/HowEthanolBitesYouInTheWallet.aspx

Production of corn in the United States is energy intensive and the net effect on energy consumption is debatable. However, as the government is subsidizing the price of ethanol-containing fuel at the pump, it is supporting demand for this product.

Production of ethanol will absorb 27% of U.S. corn production this year. The price of corn is substantially higher this year than last year. Products which use corn and corn products (such as corn syrup) are feeling cost pressure. Same for meat and dairy, as corn is an important feed for livestock.

Food prices are rising at the fastest rate in a quarter century. Increased corn production means we are importing more urea for use in production of nitrogen fertilizer from -- drum roll please -- Saudi Arabia and Quatar.

Not mentioned in the article is that the environmental benefits of ethanol are also hotly debated.

If cornstalks, switch grass, etc could be used in the production of ethanol it would strengthen the economic argument for its use as a fuel. Same for sugar cane, but the government charges hefty duties on imported sugar cane to protect the domestic sugar industry.

I am not going to get into the great debate about ethanol. Personally, I think it is much ado about nothing BUT it has increased farm incomes and is allowing the farmers to build up their balance sheets for the next drought which is a good thing.

We run about ten trucks throughout the country including backhauls of produce from the west coast. Trucking costs have increased by 6-8% annually for each of the last three years due to higher trucking wages, icnreased diesel fuel prices and increased equipment costs. On a thin margin business like the grocery business, that has as much impact on food prices.

Also, ocean freight (and the devalued dollar) play some role in making food imports significantly more expensive.

Here's one farmer's view. This morning I received an email from my sister-in-law who has a farm in Wisconsin. Re ethanol she said:

It was being opposed by green groups in Wisconsin as then-gov. and later Secretary of H/HS Thompson pushed for it. The big ethanol plant in Monroe was a huge boondoggle pork project for his buddies. The farmers around here are against it, since they see it only encourages the "corn cowboys" (people who own big equipment, hire $8.00 an hour unskilled labor, and rent ground which they plant "fencerow-to-fencerow", meaning tearing out all conservation practices and running it scorched-earth style, as in the flat-ground farming of central Illinois or Indiana). It has driven up the cost of renting ag land, and driven up the price of purchased feed. Will certainly drive up many grocery prices since corn gluten and corn sweetener are used in so many products.

Food price rises force a cut in biofuels (in China)