Rising Food Prices Spark Renewed Criticism of Ethanol Mandates

Published March 14, 2011

Whether shopping at big-box stores in the United States or haggling with vendors at marketplaces in rural Africa, consumers around the world are confronting noticeably higher prices for the food they need. Agricultural and economics experts report government policies encouraging or mandating ethanol production are largely to blame.

More Food Diverted to Fuel
Food prices globally have risen 29 percent during the past year, according to the World Bank Group, pushing tens of millions of people into poverty. Staple food crops show an even steeper rise, according to United Nations figures, with corn prices rising 53 percent and wheat prices rising 47 percent during 2010.

Agricultural experts are increasingly identifying government policies aimed at promoting biofuels—corn-based ethanol in the United States, sugar-based ethanol in Brazil, and biodiesel in Europe—as a factor in the sharp rise of the cost of grains and meat around the world.

“Biofuels have grown rapidly, from consuming 2 percent of world grain and virtually no vegetable oil in 2004 to more than 6.5 percent of grain and 8 percent of vegetable oil last year,” Tim Searchinger, a researcher at Princeton University and a fellow at the German Marshall Fund of the United States, pointed out in the Washington Post on Feb. 11. “Governments worldwide seek to triple production of biofuels by 2020, and that implies more moderately high prices after good growing years and soaring prices after bad ones.”

United States Leading Charge
Figures from the U.S. Department of Agriculture underscore how the diversion of farmland from food to fuels has changed land-use patterns in the Midwest’s corn belt. In 2001 only 7 percent of U.S. corn went to ethanol, or about 707 million bushels. By 2010, ethanol’s share was 39.4 percent, or nearly 5 billion bushels out of total U.S. production of 12.45 billion bushels.

Because the United States provides more than half of global corn exports, the diversion from food to fuel inevitably makes its presence felt on global markets.

High Costs, Few Benefits
“The ethanol mandates passed by Congress and increased by the Obama administration’s EPA regulations are proving to be impediments to economic recovery for American families,” said Sandy Liddy Bourne, executive director of the American Energy Freedom Center.

“Using corn ethanol for fuel raises the prices for meat, dairy products, and grains on our kitchen tables and has raised the cost of transporting goods for our small businesses,” Bourne explained. “This is an absurd energy policy that produces little environmental benefit, tightens the world’s food supplies, and imposes unnecessary harmful economic costs.”

Bonner R. Cohen, Ph. D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.