Study Shows Food vs. Fuel Debate Has No Standing

Study Shows Food vs. Fuel Debate Has No Standing

No statistical evidence to show link between ethanol, corn prices and rising food costs.

A study was released on Monday that concludes retail food prices are determined by various inter-related factors, including labor and transportation, not the growth in ethanol production. The study says there historically has been very little relationship between annual changes in corn prices and consumer food prices. Chairman and CEO of Informa Economics Bruce Scherr says the farm share of the retail food dollar is relatively small and increases in other marketing bill component prices are contributing to food price increases.

The new study, entitled "Analysis of Corn, Commodity, and Consumer Food Prices", concludes that "the statistical evidence does not support a conclusion that there is a strict 'food-versus-fuel' tradeoff that is automatically driving consumer food prices higher."

The analysis was funded by the Renewable Fuels Association and RFA President and CEO Bob Dinneen says the study adds to a rising body of economic analysis showing ethanol plays a trivial role in retail food pricing.

"Yet again, sound analysis has demonstrated that the farcical food-versus-fuel debate is just that – a joke," Dinneen said. "Unfortunately, the effort to scapegoat ethanol in order to continue our addiction to imported oil is not funny. The fact remains that no statistical evidence exists demonstrating a significant link between ethanol, corn prices, and rising food costs. If we learned anything from the commodities bubble and food price run-up of 2008, it should have been that consumer food prices are influenced by a multitude of important factors, not the least of which is higher energy prices. Oil prices at or above $100 will increase everything, including food prices and oil industry profits."

The study references the important role of energy prices in determining consumer food prices and the ability of ethanol to reduce gas prices. It also says if more abundant supplies of ethanol were to result in a measurable reduction in retail fuel prices - it would have to be compared to any food price increase in determining the net impact to consumers. The study references the Center for Agricultural and Rural Development's analysis that shows ethanol production reduced gas prices by an average of 16% during 2000-2010.

To view the entire report, click HERE.

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