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Reference point: Exploding the Myth - Corn Prices Not Rising Because Of Ethanol

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lildreamer316 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat May-31-08 03:53 PM
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Reference point: Exploding the Myth - Corn Prices Not Rising Because Of Ethanol
A lot of rw talking heads and bloggers are using this as an attack point against Gore (it's Al Gore's vote to support ethanol in the '90s that is making the food prices go up!! etc.); so I figured I'd better put this here for refutation help.

<snip>

"No disrespect to Marshall Martin, but the price of corn isn't quite a simple as blaming it all on biofuels.

I spoke with Jim Martin (no relation to Marshall) who is on the Federal Technical Advisory Committee for Biomass Research and Development, and he confirmed that blaming it all on ethanol neglects a number of other factors that don't always fit into a 30 second analysis.

According to Jim Martin, in 2007 the USDA reported that the US produced over 13 billion bushels of corn, the biggest corn crop ever.

"That was 2.5 billion bushels more than in 2006. In the same year, 2007, demand for corn to make ethanol went up by a billion bushels, increasing supply over and above ethanol demand, by about a billion and a half more bushels in the US than the year before. Normally that would create a surplus and prices would have fallen. They did fall for a while in late 2007, but have bounced right back up...

"Ethanol was not the only thing driving up demand. Corn exports soared in 2007 and remain very strong. Demand for corn for feeding animals is also increasing, creating more meat and dairy to feed people. Even production of high fructose corn syrup increased, the biggest direct food use of corn increased.

"What is happening to all that extra food? Americans are eating more of it, but it is also being exported at record rates. Growing economies like China and India are buying US-produced grain, meat and dairy products at record rates. That demand is pushing up prices in the US. But the funny thing is prices in many other parts of the world are not increasing as rapidly." (emphasis mine).
At the same time fuel prices are driving up costs because transportation of products is over $4 a gallon for truck diesel. Last year, for example, the cost of coffee, milk, and whipped cream all went up so much that major coffee shop chain Starbucks was forced to raise its prices. And we don't even use coffee or whipped cream to fuel our cars.

This is causing trouble beyond coffee and popcorn, as Oklahoma Horizon reports, it influences things like pizza as well.

Jim Martin attributes these price spikes in large part to a weak dollar:

"As the value of the dollar falls against other currencies, US produced goods become cheaper and prices of imported goods increase. World prices for commodities increase in dollars but may not rise or at most increase less in stronger currencies. That is just what has happened in other agricultural commodities.

"The prices of coffee and cocoa have increased by about the same percentage as corn and soybeans. We dont make biofuels out of coffee and world production has not gone down. The price has gone up almost 70% in US dollars, but in Columbia or Brazil coffee prices are up only slightly."

<snip>



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