SAINT LOUIS, MISSOURI - Once again, ethanol opponents are using food price scares to combat the ethanol industry, forgetting that this well-worn argument has very little basis in reality. Two recent news items have brought them out of the woodwork.
On October 8, the U.S. Department of Agriculture reduced the estimated 2010 corn crop by just under 500 million bushels. And on October 13, the U.S. Environmental Protection Agency announced it would allow a higher blend of ethanol, up to 15 percent, in newer cars.
Despite this news, there are several reasons why we don't need to worry about ethanol driving up corn and food prices.
First of all, the corn harvest is not yet over and the 2010 production estimate could very well increase by the time of the next USDA report, which comes out Nov. 9. After all, much of what has been harvested by the October USDA report was in the areas most adversely impacted by the summer weather. Even with the recent USDA adjustment, the 2010 average yield and overall corn crop would be the third highest on record.
Corn stockpiles as September began were more than 1.7 billion bushels, the highest since 2006. The projected surplus (or ending stocks) of nearly 1 billion bushels for the 2010 marketing year demonstrates that U.S. corn farmers will continue to meet all demands for food, feed, fuel and fiber.
Also, look at the entire marketplace. Global coarse grain supplies are nearly unchanged, the USDA reports, with lower U.S. supplies offset by increased foreign coarse grain production. The marketplace always responds well to these temporary challenges. With higher grain prices, southern hemisphere corn growers will be delivering a corn crop in six months and they will respond to market signals, just as we anticipate U.S. doing next year.
Frankly, we are even seeing some backtracking on the original "food versus fuel" debate. The United Kingdom's Department for Environment, Food and Rural Affairs issued a report in March 2010 that discounted biofuels impact, stating "Available evidence suggests that biofuels had a relatively small contribution to the 2008 spike in agricultural commodity prices." And in a July 2010 report, the World Bank stated that "the effect of biofuels on food prices has not been as large as originally thought, but that the use of commodities by financial investors may have been partly responsible for the 2007-08 spike."
In late August, the USDA reported that food price increases in 2010 will be minimal. The Consumer Price Index for all food increased 1.8 percent in 2009 and is forecast to increase 0.5 to 1.5 percent in 2010 – the lowest increase since 1992. Additionally, a Food and Agricultural Policy Research Institute study from May 2009 found that increasing the ethanol blend to 15 percent would increase corn prices only 4 cents per bushel. Consumer food prices, running at $1.4 trillion a year, would rise by only $340 million, or 0.0 percent.
Our opponents so often seem to have ulterior motives tied to their own profits. Oil companies don't like the fact that ethanol is taking over more of market for their precious petroleum. Food companies want cheap corn to help fuel their profits. And environmental extremists want any victory or any controversy to help them fund-raise and drive support for their unworkable pet projects.
Let's not forget two things in this whole debate. Farm products account for only a fraction of the retail food price you see at the supermarket or restaurant – less than 20 cents on the dollar. And corn, whether it's two, three, four or five dollars a bushel (which equals 3.5 to 9 cents a pound), is still an incredibly inexpensive and versatile food ingredient.
A few years ago, the TV show "Modern Marvels" had a show all about corn. Corn remains a modern marvel, and our farmers are out there, rain or shine, working harder and smarter than ever to grow more corn on each acre, with fewer environmental impacts and more technological advances, and for more uses than ever before.
SOURCE: National Corn Growers Association