The ethanol industry is starting to get fed up with being blamed for higher food prices.
“The ethanol industry has become a convenient scapegoat for corporate America to justify price increases to maintain profits,” said Tom Slunecka, executive director of the Ethanol Promotion and Information Council (EPIC). “The debate over rising food prices has bordered on the ludicrous; the facts are conveniently omitted from this argument.”
The latest company to blame ethanol for food price increases is Schwan Food Company which announced “it will raise prices approximately five percent across its portfolio of pizza and snack products effective Sept. 1, 2007.”
Ethanol has also been blamed for rising prices of everything from popcorn to milk recently, but the facts indicate weather and high energy costs should be taking the brunt of the blame, with an early freeze, low worldwide supplies of wheat, low milk production and rising energy costs being the driver, according to a report by the American Farm Bureau Federation.
AFBF economist Terry Francl stated, “There is little evidence that any food category has been affected by higher corn prices in any significant manner.”
The reality is that a 33% increase in petroleum prices or $1 per gallon of gas, raises the Consumer Price Index for Food by .6 to .9 percent. An equivalent $1 increase in the price of corn per bushel increases food prices only .3 percent. AFBF also repeated that the value of corn is generally a tiny fraction of the product’s price. “The value of corn in a 12-ounce box was around 2.2 cents when corn was less than $2 a bushel. Today it’s still less than a nickel. That’s not what you would call a big impact on the price of a major brand of corn flakes, which sells at $3.50 for a 12-ounce box.” Francl goes on to say, “Ethanol is getting a bad rap, because people aren’t looking at all the other factors that are involved in food prices.”