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Biofuels Not Solely to Blame for Increased Food Prices

Posted on: Tuesday, 20 May 2008, 14:00 CDT

Agriculture Secretary Ed Schafer responded to calls from lawmakers and industry groups that claim ethanol production is causing food prices to drastically increase.

Schafer said that although the demand for biofuels is impacting food prices, it “is not a major factor.”

This year, the Chicago Board of Trade set prices of wheat, corn, soybeans and rice at record highs, and rising food prices have resulted in food riots and bread lines around the world.

Twenty-four Republican senators have discussed a reconsideration of the mandate that calls for an increase in biofuels production by 2022.

But Schafer said biofuels are crucial to change the renewable fuel standard, and reducing the tax credit for producing ethanol as proposed in the farm bill.

“The change in the renewable fuel standard, the change in tariff or duty isn't going to affect food prices," said Schafer .

"We need to focus on things that will actually have an effect instead of a short-term political solution."

Earlier this month, the Grocery Manufacturers Association voiced its concerns about the call for more corn to produce ethanol.

"It's clear that American families are facing unbearable pressure -- pressure that Congress can help relieve by revisiting and revising the mandated diversion of corn to ethanol production," said GMA spokesman Scott Faber in a statement.

An estimated 3 percent of the more than 40 percent increase in world food prices last year is due to demand for corn for ethanol use, according to the Bush administration.

USDA officials and other farm and biofuel industry groups insist that other factors are causing the increased food costs, such as high oil prices and increased global food demand.

“The policy choices we have made on biofuels will deliver long-term benefits, but we also have to recognize that there may be some short-term costs or dislocations involved," said Schafer.

USDA chief economist Joe Glauber said food prices would rise by 5 percent this year, the highest rate since 5.8 percent in 1990, as retailers pass higher energy and commodity prices to consumers.

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Grocery Manufacturers Association

Source: redOrbit Staff and Wire Reports

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