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Ethanol's fans are dodging the food-cost issue

Bob Tippee
Editor

Consumers worry more about rising prices of corn flakes and milk than about the extent to which the cost of one ingredient affects all food.

Ethanol's tireless propagandists, however, are focusing on corn's contribution to the Consumer Price Index for food to imply that their favorite fuel deserves no blame.

The Renewable Fuel Association trumpets a report concluding that the price of corn, ethanol's main ingredient, has much less effect than the price of energy does on all food prices in the CPI.

"Increasing petroleum prices have about twice the impact on consumer food prices as equivalent increases in corn prices," says report author and economist John M. Urbanchuk, director of LEGC LLC.

RFA Pres. Bob Dinneen calls references to ethanol's link with food prices "baseless scare tactics" and says, "While it is true increased ethanol production is creating a real market-driven price for corn, this [Urbanchuk's] report clearly presents the undeniable facts: Energy prices, not ethanol, are responsible for much of the increase in the price of food."

This is a dodge. Of course energy costs affect food prices. And it should surprise no one that an energy-price rise affects aggregate food prices more than does a comparable increase in the price of a single grain—the core message of Urbanchuk's report.

But those assertions are irrelevant to the issue, which is that the ethanol mandate is raising prices of corn and of foods associated with it beyond increases attributable to energy. Urbanchuk addresses not ethanol's effect on the price of corn but rather corn's effect on all food in the CPI. He still concludes that "the days of cheap corn are more likely than not over."

The ethanol mandate undeniably stokes that outlook and its portents for the prices of foods based on corn. It also helps push up the energy prices onto which ethanol fans are trying to shift blame.

Congress launched these assaults on consumers on the basis of flawed energy and environmental claims in order to enrich corn growers and distillers. In a political climate where this can happen, "scare tactics" are, in fact, appropriate.

(Online June 29, 2007; author's e-mail: bobt@ogjonline.com)


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