Just about every time we write a post about ethanol- be it about a 2000 hp ethanol-fueled hypercar that makes 400% more power than the gas version but still gets the same MPG or about the US military switching its mobile units to biofuels- someone starts harping about ethanol raising food prices. Despite the fact that the farmers who make the food will tell you that energy (read: gas and oil) is the biggest factor in food costs and the fact that the whole food vs. fuel “debate” (if you can call it that) was started by the science-deniers at the AAPS, however, the idea that ethanol raises the price of food is still “out there”.
A few weeks ago, Fuels America (a pro-RFS lobbying group) released the following graphs- which I’m going to call my “Top 3 Graphs That Prove Ethanol Does NOT Raise Food Prices”. Enjoy!
1. Price of Ethanol is Down, Food Prices Still High
The price of corn is the lowest it’s been in three years, yet food prices have not come down from corn’s historic, 2012 highs. This year, the USDA is forecasting a record breaking corn crop in the US. In fact, back in October they updated their corn inventory estimate by 25% (!). Accordingly, we have reached a three year low in corn prices- with corn trading at under $4.50 a bushel at the beginning of November, compared to the 2012 peak of $8.49.
2. Only 16% of Food Prices Determined by Farms
Only 16% of grocery costs can be traced back to farm inputs, like corn or wheat. The rest goes to costs like energy (oil and gas), transportation (again, oil and gas), packaging (oil-based plastics), marketing, and labor.
2=3. Oil is Driving Up Food Prices
According to the World Bank, oil, not corn, is what has been steadily driving up global food prices over the last decade. Sure, corn is a factor- but it’s just one of many, complicated factors that goes into just 16% of grocery costs. Crude oil and refined fuel prices, meanwhile, remain the number one determinant of global food prices. The cost of energy from oil is integral to so much of the 84% we discussed in graph no. 2, above, that when the price of oil goes up, food prices must follow closely behind.
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