Texas Report Studies Ethanol and Food Prices

Cindy Zimmerman

A study done by Texas A&M’s Agricultural and Food Policy Center concludes that corn prices have had little to do with rising food costs.

The report, “The Effects of Ethanol on Texas Food and Fuel,” also finds that relaxing the Renewable Fuels Standard (RFS) would not result in lower corn prices for livestock and poultry feeders.

According to the study, “important food items like bread, eggs, and milk have high prices that are largely unrelated to ethanol or corn prices, but correspond to fundamental supply/demand relationships in the world.” The study points to higher oil prices as the underlying force impacting consumer prices and agriculture. The report was issued in response to mounting questions about the impact of increased ethanol production on the Texas agriculture sector and overall economy.

NCGANational Corn Growers Association president Ron Litterer said, “The Texas A&M study dispels the food versus fuel debate. This study shows there are many forces creating increases in food costs and ethanol is not a major factor. Clearly, corn is meeting the demands for biofuels.”

The analysis also examined the potential effect of relaxing the RFS on corn prices and found that any action to relax the standard would not significantly reduce corn prices.

“This is due to the ethanol infrastructure already in place and the generally positive economics for the industry,” the study states. “The ethanol industry has grown in excess of the RFS, indicating that relaxing the standard would not cause a contraction in the industry.”

The analysis found that there are many important economic factors driving agricultural commodity markets and that higher energy costs are the fundamental drivers of changes in the agriculture industry.

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