Filed under: Ethanol
The myth of the "tortilla effect". Ethanol prices don't affect food prices
Some voices claimed that the widespread use of ethanol had made the price of corn so expensive that Mexicans had to pay more for it. Whereas corn is really basic in Mexican kitchens and the price was raised a few months ago, it yet has to be proven that it was because of corn-based ethanol.
Such a thing is announced by Ethanol Across America, a campaign of the Clean Fuels Foundation (which is paid by ethanol producers, among others). They affirm that the impact of corn ethanol of food prices is minimal, if any. "America's farmers are the most efficient and productive in the world" said Senator Nelson (D-NE), Chairman of this campaign. "With this new demand will come increased yields and a likely leveling of prices ... We are also working hard to diversify our biofuel production by utilizing new feedstocks that range from specialty energy crops to waste materials."
The brief of the campaign also affirms that although corn prices have doubled, according to the U.S. Commerce Department's Consumer Price Index (CPI), food costs have increased just 2 percent, which is less than their historical average of 2.9 percent per year.
Pump prices are also a key argument in this campaign and uses Nebraska (where E10 to E85 pumps offer lower prices) as a good example. A final argument is that ethanol is one of the paths the US must follow to lower dependence on foreign oil.
Related:
[Source: Ethanol Across America]
Reader Comments (Page 1 of 1)
Karkus 2:02PM (7/23/2007)
I never believed the dramatic tortilla revolt stories either, but they can't deny that corn prices are way up due to the E85 greenwashing campaign (designed as a loophole to sell more american SUVs). Of course they also won't talk about all those great $ub$idie$ they're getting.
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GoodCheer 2:16PM (7/23/2007)
"The brief of the campaign also affirms that although corn prices have doubled, according to the CPI, food costs have increased just 2 percent."
This is a useless thing to say. The CPI cost of food will have a lot less to do with the price of corn than will the cost of corn-based tortillas. That information only addresses American food prices? Or does the CPI measure Mexican commodity prices as well (and if so, why do my taxes pay for that research?).
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GreyFlcn 4:16PM (7/23/2007)
Bullshit.
http://greyfalcon.net/grocerybill.png
Cost of AMERICAN food hasn't gone up much at all. Yes.
HOWEVER the international price is going crazy.
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GreyFlcn 4:22PM (7/23/2007)
Also it's a pretty CRAPPY arguement to say that the price of the E85 Ethanol is low.
Since only 1% of US Ethanol is sold as E85, and when it is sold, it's intentionally sold below market value.
http://www.gao.gov/new.items/d07713.pdf
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Joseph 11:04PM (7/23/2007)
According to Business Week, which is from the USDA, about 12% of all corn produced in 2005-2006.
Ethanol production in the U.S. has increased about 30% believe it or not between 2002 and 2004. Do the math: about 9,000,000,000 bushels in 2002, and about 11,800,000,000 bushels in 2004. Take the difference between the two and divide it by the original to get the percent of change.
I couldn't find how much corn went to ethanol in 2002, but it's clear from this extremely unscientific conclusion that ethanol doesn't have too much to do with corn prices, for now.
If it takes 14% of our corn crop to produce an amount of fuel that just barely helps fufill the U.S. quench for fuel, then obviously corn ethanol isn't the answer.
I don't think ethanol, has too much to do with increased corn prices, but it is clear that ethanol has a ways to go before becoming an environmentaly friendly, dependable, and plentiful choice of fuel.
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Bill 8:12AM (7/24/2007)
I guess you could argue that pre-ethanol, the cheap corn we exported articicially supressed world corn prices.
Nevertheless, ethanol production has absorbed all those formerly cheap exports, and tortilla prices have at least doubled, if not tripled, south of the border.
It may not affect U.S. consumers as much, given our incomes are at least an orders of magnitude above those in most of the rest of this hemisphere.
But it does affect those whose diet consists primarily of tortillas and beans, and only increases pressure to immigrate to "El Norte" in order to feed their family.
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Brad Kempeny 8:38AM (7/24/2007)
Check the price of a gallon of milk recently? $4.50 a gallon in Upstate NY. The price of corn goes up, the price of feed goes up so, the price of milk goes up. Everything made from dairy is now more expensive. Actually, anything tied to cattle will get more expensive because the cost to feed them has gone up. You think average Joe Farmer is just gonna eat the cost of the feed and keep his prices low for the Co-op? This whole article is a bunch of BS. Its even paid for by a fraken Ethanol lobby. Of course their gonna say their product isn't the reason for higher food prices.
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pkuhl 10:58AM (7/24/2007)
So wait.... the guys that profit from vast government subsidies are telling you "everything's fine. Leave us alone to get fat off of your tax dollars." and you believe it?
Next tobacco companies will do an article about "The Myth of Lung Cancer"... oh wait, they've already done that too.
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bill 11:16AM (7/24/2007)
I agree with Brad. He is obviously well grounded in common sense, something our politicians are seriously lacking. My bag of corn chips purchased bi-weekly at Wal-Mart has gone from $1.50 a bag to $2.00 a bag. I rest my case but not my animosity towards the nit-wit politicians that believe ethanol is the answer to the fuel problem. If we could power our vehicles with political stupidity and graft we would have a truly renewable fuel source.
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Dave 10:11PM (5/05/2008)
You don't think the rise in OIL has anything to do with this?? Prices of oil have nearly doubled in the last 12 months. That has a dramatic impact on the cost of shipping our food all over the world. It also affects the price of pesticides and fertilizer, the cost of running farm equipment...
There's also been low crop yields the past couple seasons causing the grain stores to be depleted. Australia in particular, one of the largest wheat exporters, has had some very bad droughts.
Also commodities are traded in US dollars...the value of the US dollar is sinking like a rock. That means prices go up, since demand isn't falling.
Ethanol production, at least in the US, has very little impact on food prices. Most of the corn we export goes to rich countries in Europe and Japan. And once it arrives there it's used for animal feed. About 1/3 of our corn crop is used for ethanol production, meaning virtually no affect on food prices. Over half of the total corn we grow stays in the US for animal feed, and ethanol can be made out of animal feed without it losing it's nutritional value. Only the starch is removed, which the animals have difficulty digesting anyway. Obviously this means that the ethanol production is not taking corn away from the human food supply or the animal food supply.
The subsidies for ethanol are going to the ethanol stills as a tax credit and to the oil companies as an incentive to blend it with their gasoline. The few hundred million in subsidies for the ethanol industry has also generated over $2 billion in new tax revenue...not a bad ROI. You want to bash subsidies, guess what the subsidies for oil are like?
I think corn will just be an interim crop anyway. Eventually we'll move to crops that are less resource intensive to grow and yield more ethanol per acre than corn.
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