Wednesday, April 23, 2008

What is the Cause of the Food Crisis?

23 Apr 2008 17:24 Africa/Lagos

ST. LOUIS, April 23 /PRNewswire/ -- Many critics point to ethanol as the cause of growing food costs and suggest biofuels standards should be reexamined. What most don't realize is that ethanol is just a fraction of the impact on food costs. More importantly, without ethanol experts at Merrill Lynch predict gas prices would be 15 percent higher. At today's average prices, that would push a gallon of unleaded over the $4 mark! Removing ethanol and replacing it with gas would cost Americans alone more than $70 billion. Pulling back on biofuels would only exacerbate the problem.

Corn Is Not The Culprit
Actual food inputs, or farm value, account for only 19 cents of every dollar of processed food, less than half what it was 30 years ago. The remaining 81 cents is wrapped up in processing, packaging, transportation, marketing and other costs. (USDA) For example, at today's prices, there's only about 6 cents worth of corn in an 18-ounce box of corn flakes. Yet, our food industry has launched a multi-million dollar campaign against ethanol. Perhaps their scorn would be better directed at the oil industry versus the American farmer. -- Higher corn prices pass through Ethanol is not a food OR to retail prices at a rate less fuel choice! than 10 percent of the corn.

The corn farmers grow is
price change. (USDA) used to process ethanol,

-- Transportation costs. A $1 per in processed food or
gallon increase in the price of livestock feed, not direct
gas has three times the impact to consumers.
on food prices as does a $1 per 1 Bushel of Corn (56 lbs)
bushel increase in the price of Provides:
corn (LECG, LLC) 31.5 lbs of starch

-- Hedge fund investors have jumped or
head first into commodity markets 33 lbs of sweetener
like corn, oil and gold to avoid or
the volatility in stocks. 2.8 gals of ethanol
(Texas A&M) PLUS

-- Food items like bread, eggs and 17.5 lbs of dried distillers
milk are largely unrelated to grains for animal feed
ethanol or corn prices, but more or
to supply and demand (Texas A&M) 13.5 lbs of gluten feed,
plus 2.6 lbs of gluten meal
for animal feed and
1.5 lbs of corn oil

Other Factors

-- Growing global population and growing affluence of Asian countries
requiring a higher protein diet.

-- Crop failures due to drought in countries like Australia.

-- Substantial increase in grower production costs due to increased fuel
and fertilizer prices

Consider this: In 1949, the price of corn averaged $1.24 per bushel. Now, corn futures are going for more than $6 per bushel. That's an increase of 394 percent in 59 years. Compare that to oil. In 1949, it averaged $2.54 per barrel. It's more than $110 per barrel today. That's an increase of 4,376 percent in the same 59 years.

Without ethanol extending our natural resources, energy prices will only continue to soar, driving up food prices in the process.

Source: National Corn Growers Assocation
CONTACT: Micah Hirschfield, +1-713-513-9516,micah.hirschfield@fleishman.com, for National Corn Growers Association

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