Ethanol in Center of Price Storm

By Joseph Morton, Omaha World-Herald, Neb.

Jul. 5–WASHINGTON — As Americans fill their grocery carts for summer cookouts, they’ll find their backyard celebrations are a little pricier this year.

Urban residents are paying about 12 percent more for ground beef than they did at the same time two years ago, according to the most recent Consumer Price Index statistics.

Going with white meat doesn’t avoid the problem either: The per-pound price of whole chickens has risen almost 16 percent from the same period in 2006.

For many months, an intense debate has been waged among interest groups and politicians in Washington over the role of corn-based ethanol in higher food prices.

The issue is coming to a head now, with the Environmental Protection Agency poised to decide soon whether to roll back the Renewable Fuel Standard. That’s the federal mandate calling for the production of 9 billion gallons of biofuels in 2008 and even greater amounts in the future.

It’s one of a handful of federal government policies spurring on the boom in corn-fed ethanol plants. Those facilities are gobbling up the country’s corn, which raises the price for corn and other crops.

Under federal law, the EPA has the power to waive or reduce the fuel standard if necessary to protect the environment or the economy of a particular state, region or the country as a whole.

Earlier this year, Texas Gov. Rick Perry asked the agency to cut the standard in half because, he says, rising corn prices are hammering his state’s livestock industry and taking a toll on its overall economy.

The EPA is required to make a decision on the request by July 23. The agency had received about 15,000 public comments on the issue, although many of those were the result of letter-writing campaigns.

Groups pushing to roll back the standard say that they have no problem with ethanol in theory but that rising corn prices are simply unsustainable.

“We are going to see producers going out of business . . . and we are going to see prices spiking for consumers,” said David Ray of the American Meat Institute. “Unfortunately, what this policy is doing is forcing people to make a choice between fuel for their cars and food for their table.”

The amount of driving a person does is often discretionary, he said.

“There are few alternatives to eating,” Ray said.

Pro-ethanol forces say the ethanol-driven rise in corn prices translates into a relatively minor bump in retail food prices. If ethanol production falls off, they say, gas prices would rise even faster and lead to an even bigger jump in food prices.

One of the campaigns in defense of ethanol, FoodPriceTruth.org, issued a statement this week that began, “Everyone knows Fourth of July food prices are through the roof.”

The group said high energy costs are to blame, making every aspect of farming more expensive. Many chickens come from Maryland or Arkansas, meaning they have to travel many miles before reaching the consumer. The cost of that transportation has a much greater effect on food prices, the group says, than the cost of feed.

Midlands lawmakers have been standing behind the ethanol mandates and defending them, but not everyone feels the same way. A group of Republican U.S. House members has sent a letter to the EPA backing the Texas request.

Whichever way the agency decides, the battle isn’t likely to let up anytime soon.

The American Meat Institute and more than 30 other organizations called on President Bush this week to ease restrictions on the importing of cheap, sugar-based ethanol from Brazil.

The idea is that Brazilian ethanol would decrease demand for corn-based ethanol and take some of the air out of the ballooning demand for corn.

—–

To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com.

Copyright (c) 2008, Omaha World-Herald, Neb.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.