Ethanol growth pushes up food prices

An Iowa farmer holds corn seeds he's planting to take advantage of higher corn prices due to increased ethanol fuel production.

TEXT OF STORY

BOB MOON: So let's talk overall consumer prices. They shot up almost three-quarters of a percent last month, the biggest rise since September of 2005.

And this will probably come as no surprise: The main inflationary culprit is energy. And, as anybody who's shopped lately for eggs or milk or beef knows, food prices are also a big factor in the higher cost of living.

You could call this a case of "out of the frying pan and into the fire." As in, we're taking more food out of the frying pan and using it for fuel. As Marketplace's John Dimsdale explains, Washington's push for energy alternatives is chewing up commodities we'd otherwise be feeding ourselves:


John Dimsdale: Biofuels are hot right now in Congress. Last year, about 20 percent of the nation's corn crop went into ethanol. An energy bill on the Senate floor would quintuple the nation's use of plant-based fuels. The price of a bushel of corn has almost doubled in anticipation. And that's increased the cost of cattle and poultry feed. Crop land normally used for soybeans and grains is shifting to corn.

A group of food manufacturers, including Kellogg and H.J. Heinz, has joined cattle, chicken, turkey and pork growers in warning the Senate about the adverse consequences of requiring more biofuel production. Jay Truitt is with the National Cattlemen's Beef Association.

Jay Truitt: We find ourselves taking a backseat, essentially, to a government-mandated, largely government-financed and government-initiated system of requiring that ethanol be a part of the fuel package across the country.

Other farm advocates welcome the new markets for corn. And at a Capitol Hill press conference today the president of the Renewable Fuels Association, Robert Dinneen, predicted there will be plenty to go around, since corn farmers have planted 90 million acres this year, the most since 1945.

Robert Dinneen: The marketplace is absolutely responding. It suggests we're going to have one of the largest corn crops in history this year. And, absolutely, American farmers can produce enough corn to satisfy the demand for feed, for fiber and fuel in this country.

Corn farmers say the coming harvest will be enough to bring prices back to earth.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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