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McCook Gazette
Editorial

No free lunch when it comes to transportation

Monday, April 13, 2009

There's something for each side in a new report about factors that affect the price of food.

According to the nonpartisan Congressional Budget Office, the use of corn-based ethanol as a fuel additive accounted for 10 to 15 percent of the increase in food prices between April 2007 and April 2008. That translates to an additional $900 million that the government will have to pay for food for the needy.

Naturally enough, the Grocery Manufacturers Association, American Meat Association, American Meat Institute, National Turkey Federation and National Council of Chain Restaurants have chimed in to criticize the ethanol industry.

"As startling as these figures are, they do not even tell the story of the toll higher food prices have taken on working families, nor the impact higher feed prices have had on farmers in animal agriculture who have seen staggering losses and job cuts and liquidation of livestock herds," a release from the ethanol opponents said.

Ethanol boosters say things differently, of course, noting that skyrocketing energy costs, one of the things ethanol is designed to combat, have had a much higher impact of costs for food programs, adding up to $5.3 billion to food prices this budget year.

The price of corn has already dropped considerable, along with the price of gasoline, although both are back on the increase again.

"The report released by the Congressional Budget Office confirms what we've known for some time: The impact of ethanol production on food prices is minimal and that energy was the main driver in the rise of food prices," said Tom Bruis, CEO of Growth Energy, an ethanol industry group.

Pro-ethanol groups have asked the EPA to increase the amound of ethanol that can be blended with gasoline from 10 percent to 15 percent, which they say could create thousands of new jobs.

The EPA hasn't decided yet, but Ag Secretary Tom Vilsack thinks the administration could quickly raise the cap to at least 12 or 13 percent.

Regardless, it's another example of the old adage, "there's no such thing as a free lunch." Even if ethanol has raised the price of food, it probably isn't the last time using energy for transportation will interfere with prices for other consumer products.

For example, while electric cars are much more economical to operate today, especially if one doesn't count the high initial cost to purchase them or replace the batteries after a few years.

But imagine what the widespread use of electricity for transportation might do to that bargain price we pay for electricity for our homes and other traditional uses.

Clearly, conservation of energy by the end user is always going to have to be an important tool in solving energy problems and lowering the emission of greenhouse gases.

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  • If they raise the ethanol level to 15% we may have to worry about receiving tickets for driving a 'Mixed Drink,' especially if there is a straw sticking out of the gas tank.

    -- Posted by Navyblue on Mon, Apr 13, 2009, at 3:30 PM

  • Umm, I am pretty sure that food prices won't adjust to the corn price until there is another corn harvest. Some of this stuff is amazing. It's not like corn is always coming in, only one harvest a year people. The food industry is using LAST years high priced corn to try to produce food with, and therefore has to keep prices higher to offset their input (corn) cost. The main reason corn based ethanol was pushed was to use up excess corn, just the same as widespread feeding of corn to cattle wasn't popular until after WWII and the increased efficency in farming equipment. We need to forget the corn and look at algae, switchgrass and other alternatives for our ethanol.

    -- Posted by plainsman on Mon, Apr 13, 2009, at 3:52 PM

  • The study stated that corned based ethanol accounted for about 10-15% OF THE 5.1% overall increase in food prices, or about .5-.8%. The rise in energy costs accounted for 39% of the 5.1% increase in food prices. The rest of the increase in food prices went in the pockets of the grocery manufactures.

    I would agree that it is time to starting focusing some attention on other feedstocks, such as algea and switchgrass. But the rise in corn prices last year had very little to do with ethanol production. Notice that all of the commodity prices went through the roof. Ethanol does not use wheat or soybeans, the the price of those commmodites went through the roof as well. Most of the rise in commodity prices can attributed to speculators driving the prices up. There was never any shortage of corn anywhere, in fact, I know several farmers that had bins full of corn that had a market value of over $6 a bushell that they couldnt sell becuase nobody had room for it. Last year when there was such a shortage of corn, and the price was rediculous based on that shortage, there was still piles of corn laying out on the ground everywhere. Sounds a little fishy to me. There was a few people that made a lot of money on the run-up of commodity prices, and off the food vs. fuel propaganda, unfortunately non of these people were farmers or ethanol producers.

    -- Posted by seentoomuch on Tue, Apr 14, 2009, at 7:33 AM

  • seentoomuch, do you think that it is fair to combine numbers of two seperate groups when deabating this. I would find it hard to believe that the "ethanol boosters" would have the same set of numbers that Congressional budget office has. Actually as far as commoditiy prices go it seems to me that whatever corn does other grains usually follow. If you think that those piles of corn weren't sold while they were sitting there I am pretty sure you'd be wrong. As for $6 corn in bins, sounds kind of like leaving a paycheck on the dresser, they evidentaly didn't need the money right now or it wouldn't still be there.

    -- Posted by plainsman on Tue, Apr 14, 2009, at 11:20 AM

  • Your right plainsman that it may be unfair to use numbers from 2 different reports, although none of the numbers used were from "ethanol booster". The 10-15% was from the congressional budget office report, and the 39% was from a report filed by the department of energy. And I do know for a fact that those piles of corn were not sold, I bought spot loads from those piles as late as December. As late as January of 09, I was still buying 2007 corn, I didnt get a load of new harvest until late January of 09. It seems odd to me that the price of wheat or soybeans or milo would go up, based on the price of corn; and even odder that they would go down, based on the price of corn, or that two commodities used for completely different purposes would be associated on the markets at all given the supply of all was very similar to the previous year?? This tells me that the price is being driven by something other than supply and demand. SPECULATION. There are people out there that do not know that an ethanol plant uses corn as its feedstock, but it does not consume the corn, it merely extracts the starch. The corn is returned to the feed market at a rate of about 63% by weight. An ethanol plant does not grind any corn that was not grown for the purposes of animal feed. The feed that an ethanol plant supplies is FDA approved, and is protien enriched. That is why feeders can feed wetcake at a much lower inclusion rate than corn. It also takes less than half the amount of water to distill a gallon of ethanol than it does to distill a gallon of gasoline. I would not try to dispute the fact that corn based ethanol is not going to replace fossil fuel, and the fact that we need to investigate other feed stocks than corn to really accomplish the collective goal. But I will stand firm in the statement that the current renewalbe fuels standard can be met without straining the food supply at all. I also believe that the rise in commodity prices last year was mostly due to a weak dollar and market speculation and had very little to do with supply and demand.

    -- Posted by seentoomuch on Wed, Apr 15, 2009, at 10:06 AM
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