Yankton Daily Press, SD
10-05-07
Kernels Of Truth?
By: Lisa Hare
lisa.hare@yankton.net
In response to recent concerns over increasing food prices and controversy over
corn-ethanol's role in the inflation, the South Dakota Corn Utilization Council
(SDCUC) has launched a new consumer education campaign.
Titled "Kernels of Truth," the project is intended to dispel what SDCUC contends
are "myths" about the correlation between high corn prices and higher food
prices.
"We have been taking some heat for the rise in food costs, and consumers need
to understand corn's role in the overall food industry and its correlation to food
prices," said Jerry Rubendall, president of the SDCUC.
Rubendall added that Kernels of Truth program would educate consumers with
facts regarding the relationship between corn prices and food prices at the
supermarket and fuel costs at the pump.
According to information provided in Kernels of Truth, only 19 cents of every food
dollar is attributed to the actual cost of food inputs such as grains and oilseeds.
The remaining 81 cents includes labor, transportation, packaging, marketing and
energy costs.
"High fuel prices that have driven up transportation costs have had more of an
impact in food prices than corn," Rubendall said.
SDCUC contends rising energy costs have "twice the impact of corn on food
prices."
A study conducted by agricultural economist Dr. John Urbanchuk, "The Relative
Impact of Corn and Energy Prices in the Grocery Aisle," analyzed the relationship
between food, energy and corn prices.
According to the study, a 33 percent increased in the crude oil price translates to
a $1 per gallon increase in the price of conventional regular gasoline; that results
in a 0.6-0.9 percent increase in the Consumer Price Index (CPI) for food. The
study also compared an equivalent increase in the price of corn ($1 per bushel)
and projected that the CPI for food would increase by only 0.3 percent.
But in a recent report by Jerry Taylor, senior fellow at the Cato Institute and
author of many studies and essays on energy and environmental issues, he
contends there are a multitude of considerations regarding the pros and cons of
ethanol production.
"We're told that ethanol has merit because it is a renewable fuel," Taylor stated in
his report. "Yet, studies find that only 5-26 percent of the energy content of
ethanol is truly renewable."
Taylor's report claims that corn ethanol production, and the mandates for
production, not only impoverish taxpayers but also are a direct contributor to the
increase in automotive fuel prices.
"Economists at Iowa State University calculate that 30 billion gallons of corn
ethanol production a year (a figure just short of the ethanol production mandate
proposed by the Senate in energy legislation passed in that chamber last month)
would translate into a 4 percent or more increase of beef, pork and poultry prices,
and an 8 percent increase in egg prices," Taylor said.
Taylor added that U.S. food prices overall would increase by more than 1.1
percent above baseline levels, which means a significantly higher U.S. inflation
rate.
But SDCUC's consumer education campaign claims livestock producers benefit
from a reliable supply of dried and wet distiller grains (DG) derived from the
production of ethanol from corn. And those DGs provide an "economical and
efficient feed source for cattle, hogs, and poultry."
Though South Dakota is anticipated to harvest a record 559 million bushels of
corn this year, higher corn prices are still impacting livestock producers.
But SDCUC asserts more ethanol plants mean more distiller grains, which
equates to increased efficiency.
"It's truly a win-win situation for our corn producer, out ethanol and livestock
industries and our state's economy," Rubendall said.
One South Dakota cattle feeder, Doug Van Duyn, is quoted in the Kernels of
Truth as saying, "It's an economic fact that there are lower costs of production to
raising livestock in South Dakota because of the close proximity to several
ethanol plants, the source of distiller grains."
But not all producers are located in close proximity to an ethanol plant, so
transportation and storage considerations make DGs an impractical alternative.
However, a study published by Food and Water Watch in September entitled,
"Retail Realities: Corn Prices Do Not Drive Grocery Inflation" found that, though
the price of corn has increased and the price of groceries has risen, higher corn
prices have not necessarily caused the higher food prices. The study compared
meat and milk price fluctuations during the past 30 years to changing corn prices
and found no direct correlation.
Taylor asserted that if ethanol production has any merit, it wouldn't need a
taxpayer subsidy, and if it doesn't have merit, "no amount of subsidy will bestow
it."
He added that, even at the most fundamental level, the data on the pros and
cons of ethanol production are being twisted.