Some people are warning there are hidden costs
to the drive for ethanol. The demand for corn-based
ethanol for fuel has pushed the price of corn close
to the highest price it’s been in 10 years. In the
first of our two-part series on ethanol, Rebecca Williams
reports that economists say the push for more ethanol will
mean higher prices at the supermarket:
Transcript
Some people are warning there are hidden costs
to the drive for ethanol. The demand for corn-based
ethanol for fuel has pushed the price of corn close
to the highest price it’s been in 10 years. In the
first of our two-part series on ethanol, Rebecca Williams
reports that economists say the push for more ethanol will
mean higher prices at the supermarket:
(Sound of burger sizzling)
Everything in your classic American meal has one thing in common.
(Sound of soda can opening and fizzing)
The burger, chips, soda, even the ketchup. They all depend on corn.
Cows eat corn. Chips have corn oil in them. And your soda and ketchup
have high fructose corn syrup as a main ingredient. Supermarkets are
loaded with food that has something to do with corn.
And lately, corn’s been near its highest price in ten years. The price
has nearly doubled. Everyone from livestock producers to beverage
companies has been feeling the squeeze of more expensive corn. And
that’s been starting to show up at the grocery store.
The US Department of Agriculture predicts our food is going to get more
expensive this year, and maybe for many years to come.
Ephraim Leibtag is a USDA economist. He says we’ll probably be paying
between two and a half and three and a half percent more this year at
the store:
“That’s on average for your food bill. So if you’re buying an average
basket of products and you spend $100 when you go to the store, now
you’ll be spending $103. But you’ll see it first in products most
related to corn. In addition you’ll see some after-effects because if
more corn is produced that may drive up the price of other commodities
if the tradeoff in land is between, let’s say, corn and other potential farm
products.”
So if farmers plant more corn for ethanol instead of soybeans, that
will drive up the price of soybeans, and in turn, the food that’s made
from them.
It turns out that’s exactly what farmers are planning to do this year.
A recent USDA report says farmers will be planting 12 million more
acres of corn than last year… and less soybeans, and rice.
Leibtag says high corn prices have been great for corn farmers, but he
says it’s been rough on a lot of other people:
“If you use corn as a main ingredient you’ve already noticed your costs
go up quite a bit. Some companies have explored the possibility of
substituting or using other products. But certainly producers of livestock and
poultry have higher feed costs. They have to think about exactly how they’re
going to produce their product when one of their inputs goes up 20, 30,
50, 80 percent in price.”
Ethanol backers say it’s just a matter of time before the market will
adjust to more expensive corn. Bob Dinneen is the president of the
Renewable Fuels Association:
“Corn prices are indeed going up… Our own industry is paying more for feedstock for ethanol today. But
at the end of the day, as the marketplace adjusts, we’ll be able to grow
more than sufficient grain to satisfy the country’s demand for food,
fuel and fiber and rural America will be better for it.”
But others argue it won’t be possible to have it all forever. Lester
Brown is the president of the Earth Policy Institute:
“Usually in the past, rises in food prices come when we have a poor
harvest somewhere in the world as a result of weather and therefore is temporary. It usually
lasts a year or so and weather comes back to normal and we get a good
harvest again. What we’re looking at now is continuous pressure on
prices as far as we can comfortably see in the future, simply because in
agricultural terms, the demand for automotive fuel is insatiable.”
Brown says we’re at risk of trading food for ethanol fuel. And he says
it’s not just going to impact food prices in the US. It’s also going
to affect food supplies worldwide, especially in developing countries.
“The biggest effects are hitting people in other countries who consume
corn more directly, like Mexico for example, which has a corn-based diet and there
the price of tortillas has gone up about 60 percent.”
Brown says many US politicians have what he calls “ethanol euphoria.”
He’s called for a moratorium on licensing new ethanol plants. He wants
the government to think about whether it makes sense to keep
subsidizing ethanol made from corn.
Many people, even some in the ethanol industry, say ethanol from corn
is a limited solution. So researchers are looking for ways to make
ethanol from other sources, such as woody plants like switchgrass.
In the meantime, ethanol from corn is still the most viable option.
Economists say if corn gets diverted into ethanol on a large scale,
that might mean we’ll all be paying higher food prices for the next
several years.
For the Environment Report, I’m Rebecca Williams.