The Ledger, FL
12-18-07
Food and Fuel Compete for Land
LEAH NASH FOR THE NEW YORK TIMES
Shopping at a Whole Foods Market in suburban Chicago, Meredith Estes said
food prices have jumped so much she has resorted to coupons. Charles T.
Rodgers Jr., an Arkansas cattle rancher, said normal feed rations so expensive
and scarce he is scrambling for alternatives. In Oregon, Jack Joyce, the owner of
Rogue Ales, said the cost of barley malt has soared 88 percent this year.
For years, cheap food and feed were taken for granted in the United States.
But now the price of some foods is rising sharply, and from the corridors of
Washington to the aisles of neighborhood supermarkets, a blame alert is under
way.
Among the favorite targets is ethanol, especially for food manufacturers and
livestock farmers who seethe at government mandates for ethanol production.
The ethanol boom, they contend, is raising corn prices, driving up the cost of
producing dairy products and meat, and causing farmers to plant so much corn
as to crowd out other crops.
The results are working their way through the marketplace, in this view, with
overall consumer grocery costs up roughly 5 percent in a year and feed costs up
more than 20 percent.
Now, with Congress poised to adopt a new mandate that would double the
volume of ethanol made from corn, ethanol skeptics say a fateful moment has
arrived, with the nation about to commit itself to decades of competition between
food and fuel for the use of agricultural land.
“This is like a runaway freight train,” said Scott Faber, a lobbyist for the Grocery
Manufacturers Association, who complained that ethanol has the same “magical
effect” on politicians as the tooth fairy and Santa Claus have on children. “It’s
great news for corn farmers, but terrible news for consumers.”
But ethanol critics are not getting much traction with their argument. Last week,
the Senate voted 86 to 8 for a new energy bill containing expanded ethanol
mandates, and the House is expected to follow suit this week.
Experts with no stake in the argument say ethanol has indeed contributed to
rising food costs, but that is only one among several factors. Higher fuel costs
are driving up the expense of growing and transporting food. And strong
economic growth abroad is increasing demand for agricultural commodities,
allowing once-destitute people to augment their diets with meat and dairy.
It is also a tough time, politically, to make a case against ethanol. With continuing
turmoil in the Middle East, sky-high gas prices and presidential candidates
stumping in Iowa, the heart of the Corn Belt, a new renewable fuel standard has
plenty of supporters on Capitol Hill.
“We did get whipped,” said Jay Truitt, vice president of government affairs for the
National Cattlemen’s Beef Association. “We continue to be caught up in this
fervor, almost spirituality, about ethanol. You can’t get anyone to consider that
there is a consequence to these actions.”
He added, “We think there will be a day when people ask, ‘Why in the world did
we do this?’”
The bill in Congress would increase the mandate for renewable fuels to a striking
36 billion gallons by 2022. That is far beyond a requirement on the books now for
7.5 billion gallons of ethanol by 2012.
Much of the newly required ethanol could be made from agricultural wastes like
corn stalks and straw, and its production would not compete directly with food
production. But the proposed mandate, known as a renewable fuel standard, also
calls for 15 billion gallons of ethanol made from grains, primarily corn.
Ethanol advocates say they believe yield increases will supply much of the extra
corn needed to meet the new mandate.
Mark W. Leonard, who raises cattle and corn in western Iowa and owns a stake
in several ethanol plants, said it was “absolutely essential” that the government
increase the mandate for ethanol, and he urged Congress to push up the
deadlines.
“This is a national security issue more than anything else,” said Mr. Leonard,
noting the nation’s dependence on imported oil. “We need to quit sending money
to people who want to blow us up.”
When the current standard was passed as part of a 2005 energy bill, it set off a
construction binge of ethanol plants that continues, primarily in the Corn Belt but
also in places like California, Texas and upstate New York. As new plants
opened and the demand for ethanol increased, so did corn prices.
Farmers have responded to the boom by planting more and more corn. In fact,
the amount of corn planted this year, 94 million acres, was the most since World
War II, and it produced a record crop of 13.2 billion bushels. But even with
bumper crops, corn prices are expected to climb next year.
Joe Victor, vice president for marketing for Allendale, an agricultural research
firm in the Chicago suburbs, said Midwestern farmers would face a pleasant
quandary in the spring in deciding what to plant because wheat and soybean
prices are at or near record highs and corn prices remain bullish.
“Oh geez, they’ve got money galore,” he said. “The Senate vote for the energy
bill was a real confidence builder for the farmer to think, ‘They are not going to
pull the rug out from underneath us.’”
The price increases for corn have had a broad impact, both because farmers are
planting more corn and less of other crops and because livestock producers are
scrambling for feed substitutes. For instance, soybeans acreage planted this year
was about 16 percent less than in 2006.
Feed costs have increased 25 to 30 percent in the last year, according to David
Fairfield, director of feed services at the National Grain and Feed Association. He
attributed virtually all of the increase to the demands of the ethanol industry
One consequence of the higher feed costs is rising competition for malt barley
between livestock farmers, who want it for feed, and brewers, who need it for
beer. Mr. Joyce, the Rogue Ales owner in Newport, Ore., said he has been
forced to raise prices to pay for the additional costs of ingredients.
Mr. Rodgers, the Rison, Ark., rancher, said he used to feed his cattle a mixture of
corn gluten and soybean hulls. But he said he cannot get corn gluten anymore,
and the cost of soybean hulls has risen to $150 a ton from about $105 a ton.
“I’m all for us being energy independent,” he said, but added, “it’s got to be
market driven.”
The impact of ethanol on prices at the grocery store is less certain.
Grocery prices that are measured by the Consumer Price Index increased 5.4
percent in the last year, with dairy prices up 14 percent; meats, poultry, fish and
eggs, 5.4 percent; cereal and baked products, 5.2 percent; and fruits and
vegetables, 4.5 percent.
Those increases outpaced overall inflation of 4.3 percent. Government
economists predict grocery prices will jump another 3 to 4 percent in 2008.
In a study completed in May, researchers at Iowa State University concluded
that retail food prices had already increased by $47 per person in the previous
year or so as a result of higher corn prices. If corn prices near $4.50 a bushel
next year, as many people expect, the research suggests that retail food prices
for meat will increase about 7.5 percent and egg prices will go up 13.5 percent.
But researchers for the Renewable Fuels Association dispute that math and
contend that the link between corn prices and grocery prices is weak.
As the debate continues, one thing is certain: American shoppers are
increasingly frustrated over rising prices.
“It’s the staples, the cheeses, the milks and produce,” said Ms. Estes, shopping
at the Chicago-area Whole Foods. “It’s going up, and my grocery bill at the end,
it’s like, ‘Are you kidding me?’”