4/28/2008

New Op-ed up at Fox News: Ethanol Mandates Cause Rising Food Prices

You can read the new piece here:

Food prices are rising worldwide. Some nations, such as Egypt and Cameroon, are facing riots as the prices for basic food stuffs rise. Other countries from India to Cambodia have banned food exports to try and keep prices low and reduce voter anger.

In the U.S., the Wall Street Journal last week gave advice normally associated with survivalists warning about the end of civilization. Readers were warned to start hoarding non-perishables ("Dried pasta, rice, cereals, and cans of everything from tuna fish to fruit and vegetables").

But in case anyone missed the seriousness of the message, the Journal went so far as to give the extra advice that: "You should also save money by buying them in bulk."

Not all food prices are soaring, however. Food and beverages as a group aren’t rising much faster than overall inflation. Inflation over the last year was slightly under 4 percent, with food and beverages at 4.4 percent. . . .


UPDATE: IBD notes that "The International Monetary Fund says U.S. ethanol production accounts for half the rise in global corn demand since 2005."

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2 Comments:

Anonymous Anonymous said...

Hi John,

Fidel Castro made this same point in 2007:

America's ethanol drive
Apr 4th 2007
http://www.economist.com/opinion/displaystory.cfm?story_id=8960412

It is not often that this newspaper finds itself in agreement with Fidel Castro, Cuba's tottering Communist dictator. But when he roused himself from his sickbed last week to write an article criticising George Bush's unhealthy enthusiasm for ethanol, he had a point. Along with other critics of America's ethanol drive, Mr Castro warned against the “sinister idea of converting food into fuel”. America's use of corn (maize) to make ethanol biofuel, which can then be blended with petrol to reduce the country's dependence on foreign oil, has already driven up the price of corn.

4/28/2008 8:29 PM  
Anonymous Chris Jens said...

Couldn't read the whole piece, since the link was wrong.

Most of the foodstuffs we use in this country are heavily processed. When the price of a bushel of corn went up from just over $2.00 to near $6.00 the cost of the corn in a box of cornflakes went from $0.04 to $0.12. But a box of cornflakes is about $2.50 last time I looked. (I don't eat the stuff) The difference is largely energy. If you see or have seen a price increase in cornflakes, the increase is more likely due to the cost of the energy to process the corn and transport it to the store (natural gas for cooking, diesel fuel for transportation) than it is to the cost of the corn itself.

I strongly suspect that if you did a similar calculation of the conversion of wheat to pasta for example, the results would be similar.

Data used, 1 bushel of corn = 56 Lbs, produces 50 (for a round number) boxes of cereal at 14 oz each, allowing for 28 percent wastage of the corn.

4/29/2008 10:25 AM  

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