Research concludes ethanol isn't responsible for high food costs

By Kris Bevill | April 08, 2008
Web exclusive posted April 25, 2008 at 9:40 a.m. CST

A new report released by researchers at Texas A&M's Agricultural and Food Policy Center titled The Effects of Ethanol on Texas Food and Feed addresses common questions raised in the food versus fuel debate and it comes to the conclusion that ethanol producers already knew - the price of corn has little to do with rising food costs. The study is a result of questions raised by livestock and crop producers, elected officials, media and consumers, who wanted to know the reasons for cost and price changes and what impact those changes will have on the economy.

University researchers and professors, who co-authored the report, include David Anderson, Joe Outlaw, Henry Bryant, James Richardson, David Ernstes, J. Marc Raulston, J. Mark Welch, George Knapek, Brian Herbst and Marc Allison.

One of the report's key findings was that overall higher energy costs are the driving force behind rising food and feed costs. The report noted that over the past three years oil prices have increased $65 per barrel and the effects of those continuous price hikes continue to ripple through the U.S. economy. It also stated that natural gas prices have risen due to increased demand. Natural gas plays a major part in the production of nitrogen fertilizer.

The report stated that while increased demand for corn to make fuel has contributed to corn's high prices, it must be taken into context. Another factor affecting high corn prices, according to the report, is the decline in total acres of corn planted in the 2006-2007 crop season. As well, higher fertilizer and fuel prices have contributed to rising corn prices.

Researchers also explored the possibility of relaxing Renewable Fuel Standards in an effort to lower corn prices and concluded that because the ethanol infrastructure is already in place and is generally enjoying positive economics, relaxing the standard would have no effect on corn prices.

The report concluded that the overall effect of ethanol and it's byproducts on agriculture and the economy is complex and there is no one factor responsible for rising food and feed prices.

The report can be viewed in its entirety at www.afpc.tamu.edu.