Study finds corn not responsible for higher food costs

A new analysis of food, energy and corn prices finds rising energy prices have twice the impact on the Consumer Price Index (CPI) for food than does the price of corn, the National Corn Growers Association (NCGA) notes.

The report conducted by John Urbanchuk of LECG, LLC, notes “rising energy prices had a more significant impact on food prices than did corn.”

“Energy costs have a much greater impact on consumer food costs as they impact every single food product on the shelf,” said Urbanchuk. “Energy is required to produce, package and ship each food item. Conversely, corn prices impact just a small segment of the food market as not all products rely on corn for production.

“While it may be more sensational to lay the blame for rising food costs on corn prices, the facts don’t support that conclusion. By a factor of two-to-one, energy is the chief factor determining what American families pay at the grocery store.”

Much debate has been centered on the notion that the United States will not be able to produce enough corn to satisfy all markets, creating shortages and intensifying competition that will continuously drive corn prices higher.

This claim ignores advancements in seed, farming and ethanol technologies that are allowing American farmers to continue feeding the world while helping to fuel our nation.

“There is no conflict between food and fuel — we can produce both,” said Ken McCauley, NCGA president.

“Demand for corn is at unprecedented levels, and we fully expect unprecedented levels of supply as well. This spring U.S. corn growers planted the largest crop since 1944. Given normal weather conditions this summer, we’ll produce the largest corn crop in history, and that will allow us to readily satisfy demand for livestock feed, human food processing, exports and fuel ethanol.”

According to the study, “A 33 percent increase in crude oil prices — the equivalent of $1 per
 gallon over current levels of retail gasoline prices — would increase retail food prices measured by the CPI for food by 0.6 to 0.9 percent. An equivalent increase in corn prices — about $1 per bushel over current levels — would increase consumer food prices only 0.3 percent.”

“Critics of ethanol, including those in the animal feeding and oil industries, are engaging in baseless scare tactics to convince Americans that ethanol production will irreversibly increase their grocery bills,” said Renewable Fuels Association President Bob Dinneen.

“While it is true increased ethanol production is creating a real market-driven price for corn, this report clearly presents the undeniable facts: energy prices, not ethanol, are responsible for much of the increase in the price of food.

“Further, our industry is rapidly developing next generation cellulosic ethanol technology that will allow us to meet the growing demand for renewable fuels from wood chips, switchgrass and other materials in addition to corn. Ultimately, the market will adjust, and all those in the food, fuel and fiber industry will be able to prosper.”

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