Gas prices are not the only thing on the rise. As of yesterday, corn is at its highest level in three years at $7.60 a bushel and prices are not predicated to go down anytime soon. The United States government anticipates a shortage despite farmers’ intent to plant 5 percent more acreage of corn this year, a shortage is still predicted.

Reuters also indicates that rising corn prices will continue:

U.S. corn prices will keep rising to new highs over the coming months, a new Reuters poll has found, as demand from ranchers and ethanol makers proves better able to withstand record costs than many thought.

The forecasts will compound inflation concerns as higher feed costs filter through to beef and chicken prices. Analysts also warned that anything less than perfect growing weather for the spring crop could push prices even higher as traders fear tight conditions will extend well into next year.

As the article later states, the chances of having a perfect growing season with no weather related problems are very slim.

Reuters also asserts that food prices rose by 14 percent over the past three months which can be attributed to the rising use of ethanol and the ranchers demand for feed for livestock: “The rally has sharpened the focus on two imponderables: the price point at which livestock ranchers or ethanol makers will begin to cut back use, relieving demand pressures; so far, traders say there’s little evidence of this happening yet.”

Perhaps the United States should learn from China’s mistake. An article in the New York Times describes how the biofuel sector does affect the food supply and price, and how China’s ethanol use resulted in higher food prices:

It can be tricky predicting how new demand from the biofuel sector will affect the supply and price of food. Sometimes, as with corn or cassava, direct competition between purchasers drives up the prices of biofuel ingredients. In other instances, shortages and price inflation occur because farmers who formerly grew crops like vegetables for consumption plant different crops that can be used for fuel.

China learned this the hard way nearly a decade ago when it set out to make bioethanol from corn, only to discover that the plan caused alarming shortages and a rise in food prices. In 2007 the government banned the use of grains to make biofuel.

However, the article later explains that China is now using cassava, instead of corn. China may have not entirely learned their lesson as cassava is still a food crop used predominately in Africa and also in China during food shortages.

The article by the New York Times adequately closes with a quote from Olivier Dubois, a bioenergy expert at the UN’s Food and Agriculture Organization that gets at the root of the food and fuel argument: “We have to move away from the thinking that producing an energy crop doesn’t compete with food,” he said. “It almost inevitably does.”

Previous blog posts on ethanol, rising food prices, and the moral issues of the two can be found here, here, here, and here.


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  • http://www.acton.org John Couretas

    US program seeks to increase use of E-85 fuel

    DES MOINES, Iowa — The federal government wants to increase production and use of a higher blend of ethanol fuel by giving financial assistance to gas stations that install more pumps for the fuel, U.S. Agriculture Secretary Tom Vilsack said in advance of a formal announcement planned for Friday.

    Vilsack said President Barack Obama wants the U.S. Department of Agriculture to help ensure 10,000 flex-fuel pumps for E-85 are available across the country within the next five years.

  • Pingback: Experts Point Fingers at Ethanol for Rising Corn Prices – Acton Institute (blog)

  • Jean Bois

    The following article is a sign of the times. The US produces corn – period. When artificial “monkeying” with supply and demand is added to an otherwise major crop, it destablilizes in many unforseen ways. Its bad enough that feed stocks and food are impacted, but other industries ie cellulose (paper) are all so affected. Will the job losses in one sector be offset by the gains in another? Who knows? Why add to the trama?
    http://www.meatpoultry.com/News/News%20Home/Global/2011/4/XL%20Foods%20to%20cease%20production%20at%20several%20plants.aspx?LoggedIn=true&EmailKey=logins@foodinstitute.com

  • http://www.acton.org John Couretas

    U.S. corn reserves may hit 15-year low

    ST. LOUIS – Rising demand for corn from ethanol producers is pushing U.S. reserves to the lowest point in 15 years, a trend that could lead to higher grain and food prices this year.

    The Agriculture Department has left its estimate for corn reserves unchanged from the previous month. The reserves are projected to fall to 675 million bushels in late August, when the harvest begins, or roughly 5 percent of all corn consumed in the United States. That would be the lowest surplus level since 1996.

    The limited supply is chiefly because of increasing demand from ethanol makers, which rose 1 percent to 5 billion bushels. That’s about 40 percent of the total crop.

    But the increase didn’t alter the agency’s overall estimate, mostly because livestock producers are expected to scale back their corn purchases.

    more >>

  • Anonymous

    Excellent points – the price of corn is up to 654 cents per bushel

    http://www.cornmarketprice.com