Ethanol from Corn Driving Up Food Prices

By U.S. Rep. James Moran
June 17, 2008

The cost of food around the world has been growing rapidly in past year. There are a number of factors responsible, from rising energy costs to market speculation. But one factor which the federal government has the power to control concerns a policy designed to encourage the development of renewable fuel.

In 2005, Congress enacted a “Renewable Fuel Standard” that included a requirement mandating a percentage of ethanol derived from corn be produced and used as an additive to gasoline. The result is that today we are diverting nearly one-third of our total corn harvested to the production of ethanol.  At the same time, the price of corn, the source of 97 percent of ethanol in the United States and also the main ingredient in animal feed, has tripled over the past two years.

While I am not opposed to using ethanol as a part of our energy strategy to off-set mile-high gas prices, I am concerned about the effect this corn-ethanol mandate is having on our economy and world food supply.  The unprecedented price of corn is having a ripple effect on food prices directly impacting consumers at the grocery store, not to mention the poor and starving in the third world.

This week I lead a bipartisan group of 58 members in sending a letter to the EPA calling for the promotion of advanced biofuels that do not contribute to food price inflation or create new environmental concerns.  These biofuels include switch grass, wood and organic waste material. Our letter calls on the EPA to redouble their efforts to rapidly transition away from biofuels that draw down our food supply towards these newer, more sustainable energy sources.

The EPA is currently reevaluating the impact of the Renewable Fuel Standard because of the aforementioned concerns regarding the economy and the environment. At present, food price inflation in the U.S. is rising at twice the overall rate of inflation, while global food prices have nearly doubled in the past three years. In our letter, we point out that there are several factors driving food costs up, emphasizing the importance of finding sources for biofuel production that “do not divert food and feed from domestic and international supplies.”

Respected economists, as well as the leaders at USDA, World Bank, UN and International Monetary Fund acknowledge that this policy is a major factor behind higher food prices. Not only is this diversion of food for fuel production raising food prices, it is also having a limited effect on decreasing U.S. gasoline consumption, displacing only 4 percent of America’s gasoline supplies this year.

Given these facts, it is my belief and that of the Members who signed the letter to the EPA that we should now aggressively shift to the development of non-food based, cellulosic biofuels. These advanced fuels could displace one-third or more of domestic gasoline supplies, significantly reduce the price of gasoline and reduce greenhouse gas emissions from fuels by 80 percent or more.

Given the impact on consumers from higher food prices, it is clear that any delay in bringing the next generation of biofuels online comes at our serious detriment.