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Ethanol Producers Say Rising Food Prices Not Their Fault

By Mark Huffman
ConsumerAffairs.com

August 2, 2007

But as ethanol production has risen this year, so has the price of corn, the primary grain used today to produce ethanol.

As corn prices have surged, so have food prices. Food producers and manufacturers point the finger at ethanol. They maintain that corn prices are surging because of refiners’ insatiable demand for alcohol, distilled from corn. The ethanol industry is fighting back, saying it isn’t to blame.

“A box of corn flakes only has a nickel’s worth of corn. What impacts consumer food prices far more than the price of corn is the energy, the marketing, the packaging, everything else that goes into bringing a box of corn flakes into grocery stores,” said Bob Dinneen, a spokesman for the Renewable Fuels Association.

“In fact, studies show that the price of gasoline has more than twice the impact on consumer food prices than does the price of grain.”

Carmakers are also joining the food vs. fuel debate. General Motors, which has a significant investment in so called “flex fuel” vehicles – automobiles than can run on up to 85% ethanol, says ethanol is the best way to reduce dependence on petroleum, reduce CO2 emissions and reduce the amount imported oil.

“We think it’s important to have energy diversity and plenty of alternatives, and 85 percent ethanol is here now, and the vehicles to run on it are here now,” said Elizabeth Lowery, a spokeswoman for GM.

Currently, all automobiles are capable of running on fuel that is 10 percent ethanol and 90 percent gasoline. Today, there are around 6 million flex fuel vehicles on the road that can run on the 85 percent ethanol blend.

But is it enough to make a difference? Most agree that it will take more time to tell. At best, ethanol production is expected to replace less than five percent of U.S. gasoline usage in 2007.

That’s a steep price to pay for higher food casts, food manufacturers say. They argue that escalating corn prices, sparked by the increasing demand for ethanol, has forced them to raise prices for items containing corn, including meat and dairy products from animals that are fed the grain.

They maintain that since 20 percent of today's corn crop is used to produce ethanol, it can’t help but have an impact on food prices -- everything from meat and dairy products to beer, soda pop and even charcoal briquettes -- because all of these products contain corn.

As prices of nearly everything continue to rise, the "food vs. fuel” debate may be just beginning.

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