Pioneer Press, MN
05-01-07
Ethanol's collateral damage: food costs
Expert says prices up $50 a year per person
BY TOM WEBB
Pioneer Press
How much is ethanol raising food prices? About $50 a year per person, says an
Iowa State University economist.
The ethanol boom has raised demand for feed corn, and that has increased the
price. Now those increases are rippling through the food chain, touching
everything from the price of eggs (because of chicken feed) to the cost of soft
drinks (which use corn sweeteners).
Economist Bruce Babcock said in St. Paul Tuesday that the $1.50-a-bushel
boost in corn prices, from roughly $2 to $3.50, is "a one-time shot, not a
perennial increase - you don't get that shock every year."
But for the theoretical family of four, a $200 increase in annual grocery bills isn't
chicken feed, either. Speaking at the University of Minnesota, Babcock asked an
audience at a biofuels seminar, "Is that a high price to pay for ethanol?" Some in
the crowd muttered, "Yes."
Corn is America's No. 1 crop, and is useful in so many ways that it is deeply
embedded in the U.S. food system. Some food companies have already
increased grocery prices, citing higher ingredient costs due to ethanol. While
some price increase may be valid, Babcock also suspects some firms are "using
any excuse they can to pass along increases."
"There's been so much competition in the U.S. economy that they haven't been
able to pass along cost increases," added Babcock, whose forecasts are widely
used in shaping farm policy in Congress. Corn prices give companies an
opportunity, he said, and "I think they're
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using it."
Tom Webb can be reached at twebb@pioneerpress.com or 651-228-5428.