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Ethanol Gives Consumers Half a Loaf, Bakers Say

Is nation's energy policy half-baked?

By Mark Huffman
ConsumerAffairs.com

May 2, 2008

"Why are we putting food in our gas tanks instead of our stomachs," asked Rich Reinwald, owner of Reinwald's Bakery and First Vice President of the Retail Bakers of America, in testimony before the Congressional Joint Economic Committee.

The bakers' group says food inflation in the first quarter of this year almost matched the rate for all of 2007, straining consumers' budgets to the breaking point.

"There are steps Congress and the Administration can take that would ease this burden on American families," said ABA President & CEO Robb MacKie.

McKee contends the high costs of commodities have driven up the price for essential foodstuffs at the grocery store. Behind those high commodities prices, he says, is demand generated by Congress's ethanol mandates.

In 2005 Congress passed legislation requiring the use of nearly eight billion gallons of ethanol in the U.S. by 2012. Critics say its effects on fuel supplies will be minimal, pointing out the U.S. currently uses 140 billion gallons of gasoline a year.

Farmers, however, seem to like the new policy, as it has coincided with record prices for their crops. The ethanol industry, along with farm state lawmakers, disputes the contention that ethanol production is driving up food prices, blaming instead the skyrocketing cost of gasoline.

But pressure is building in Congress to back away from the build up in biofuels. Earlier this week Sen. Kay Bailey Hutchison (R-TX) announced she will introduce legislation to freeze a biofuel mandate required in a bill passed last year. The bakers are backing that idea, saying the rush toward biofuels may have been, well, half-baked.

"The Energy Independence and Security Act of 2007 allows for a waiver of the renewable fuel standard if implementing the standard would harm the economy. We are reiterating our call to implement the waiver," MacKie said. "ABA has argued that the economy is under tremendous stress due in part to the ethanol mandate."

Grocers agree

Grocers and other food processors have also complained that ethanol is taking food off the nation's tables.

"The federal government's food to fuel mandates are diverting one quarter of America's corn supply from kitchen tables to fuel tanks, and the result is corn selling for $6 a bushel," said Scott Faber, a Washington lobbyist for the Grocery Manufacturers Association Faber.

"In tough times like these, Congress and the Administration need to take a hard look at the unintended consequences of these mandates that raise food prices without offering a significant environmental benefit."

The ethanol industry rejects claims that its biofuels that are driving food prices higher. Industry spokesmen says food prices are going up, long with everything else, because of skyrocketing fuel costs.

"The biofuels policy that is driving higher prices of corn, other grains, and soybeans will cost the U.S. economy more than $100 billion from 2006 to 2009," said Thomas Elam, president of FarmEcon LLC, a food industry consulting firm. "It is inevitable that these costs will be passed along to consumers."

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