Food, Fuel and Politics

The Food before Fuel campaign—designed to convince the public that biofuels are responsible for rising food costs and to press the government to rein in its renewable fuels' mandate—has caused a lot of heartburn. The question is whether consumers believe that the companies supporting this campaign are looking out for their best interests.
By Anna Austin | August 04, 2008
In the past year, global food prices have increased more than 40 percent and gasoline prices have nearly doubled. It's no wonder people are frustrated and looking for someone or something to blame as their bank accounts dwindle. It didn't take long before a finger was pointed in ethanol's direction, aided by the Grocery Manufacturer Association's Food before Fuel campaign.

The Food before Fuel Web site says that the organization was "created to urge public officials to revisit and restructure policies that have increased our reliance on food as an energy source, and to carefully address how to develop alternative fuels that do not pit our energy needs against affordable food and environmental sustainability." Specifically, Food before Fuel supports Texas Gov. Rick Perry, who in late April asked the U.S. EPA to grant a 50 percent waiver from the Renewable Fuels Standard ethanol mandate.

The Web site provides various studies, news items and information about food prices and the environment all geared toward convincing visitors that biofuels production is the No. 1 cause of rising food prices. More than 55 different organizations ranging from the National Chicken Council to the Tortilla Industry Association are listed as supporting members.

Although some visitors to the Web site may be convinced that biofuels are eating into their food supply, the U.S. Congress doesn't seem to be biting. The Senate Energy and Natural Resources Committee held a hearing on June 12 to analyze the relationship between the U.S. renewable fuels policy and food prices at the campaign's request. The committee recommended that the RFS ethanol mandate remain as is. Sen. Jeff Bingaman, D-N.M., who chairs the committee, read a letter from U.S. Energy Secretary Samuel Bodman and Agriculture Secretary Ed Schafer, which responded to questions posed by Bingaman concerning the relationship of biofuels to food prices and the affects of gasoline prices. It was noted in the letter that ethanol and biodiesel consumption accounts for only a 3 percent to 4 percent increase in retail food prices.

In a press release dated two days before the hearing, the Food before Fuel campaign used a number generated by the International Monetary Fund in a report it produced in April 2008 to show how much biofuels have contributed to the increase in food prices. "Congressional policies mandate the conversion of more than one-third of all U.S. corn to ethanol, with additional subsidies and tariffs further promoting the diversion of food to fuel," the press release said. "Food policy experts broadly agree that these policies have contributed to record food price inflation, and the International Monetary Fund reports that U.S. food-to-fuel policy is responsible for more than 30 percent of food price inflation globally."

In their letter, Bodman and Schafer addressed the IMF's information stating that the percentage of retail food costs to consumers varies from country to country depending on diet, and the proportion of staples versus highly processed food consumed. "The IMF global food commodity price index is often quoted as an indicator of the change of global food prices," the letter said. "It is unclear how the list of commodities and the prices used in the IMF index relate to the foods purchased and the prices paid for food items by consumers in less developed countries."

The letter from the secretaries also concluded that without biofuels, gasoline prices would be 20 to 35 cents higher per gallon than the current price, citing a Texas A&M University study titled "The Effects of Ethanol on Texas Food and Feed." This study concluded that higher energy prices are the major contributor to higher food prices. "The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil," the report found. "The ethanol industry has grown in excess of the RFS, indicating that relaxing the standard would not cause a contraction in the industry." Joe Outlaw, a professor and agricultural economist at Texas A&M and one of the authors of that study addressed the Senate Energy and Natural Resources Committee hearing, as well as several other energy and agricultural representatives.

While none of the biofuels' critics attended the hearing, a new report "Rising Commodity Prices and their Impact upon U.S. Food Inflation" by Bill Lapp, principal of the consulting firm Advanced Economic Solutions, was posted on the Food before Fuel Web site once again blaming biofuels for increased food prices. "The underlying driver of the higher commodity prices in past years (2002-2006) included global economic expansion, rising energy prices, as well as the weak dollar," the report said. "While these price drivers remain intact today, the rapid expansion in the use of corn to produce ethanol is currently the most significant factor driving corn and other agricultural commodity prices to record levels."

Lapp is a former chief economist for ConAgra Food Inc. and Advanced Economic Solutions clients include restaurant chains, food manufacturers, distributors, investment firms, agricultural producers and government agencies, according to the company's Web site.

Consumer Concern
The Food before Fuel campaign claims it's not anti-biofuels and is only concerned about consumers. When contacted by EPM, a GMA representative said, "We are all for biofuels, but are supportive of alternative energy policies that will not pit our fuel needs against our food needs." Not everyone is convinced that the GMA and other food organizations and companies are looking out for the best interests of consumers, however, and some of the nations' farm groups aren't happy with the tactics that the campaign is using. In May, the National Corn Growers Association sent a letter to the GMA requesting that it "stop blaming American farmers and questioning our collective ability to rise to the opportunity and challenge, as we always have, to produce plenty of food, feed, fiber and fuel." The NCGA also said that it respected the GMA's right to its opinion regarding America's biofuels policies and its perceptions of the cost increase for the grains they use as inputs. "However, those concerns can be shared in a rational manner and need not be promoted via falsehoods regarding food price increases, starvation and environmental concerns," the NCGA said. "Please know that your campaign is sowing seeds of deep anger throughout farmer and rural communities toward food companies." The letter was also signed by the American Soybean Association, National Association of Wheat Growers and National Sorghum Producers.

Ironically, the bottom lines of some of the groups supporting the Food before Fuel campaign haven't suffered greatly in light of higher commodity prices. In June, General Mills reported that in its fiscal year that ended May 25, 2008, net sales grew 10 percent to $13.7 billion and operating profits were up 6 percent to $2.4 billion. In its first quarter report for 2008, Kraft Foods Inc. said its net revenues increased 20.8 percent to $10.4 billion and that operating incomes in the fist quarter increased 3.8 percent from the previous year to $1.2 billion. Kellogg Co. reported 2008 first quarter sales at $3.3 billion, an increase of 10 percent from the first quarter of 2007 and operating profit at $545 million an increase of 9 percent. Kellogg credited its profits to "business momentum, recent price increases and focus on productivity." When contacted by EPM, Kellogg declined to comment when asked to elaborate on its "recent price increases."

Brooke Coleman, executive director and co-founder of the New Fuels Alliance and a food price expert, says the companies that are pressing for an ethanol mandate waiver and insinuating that their main concern is consumers, have a much different agenda. FoodPriceTruth.org was launched in response to the Food before Fuel campaign. Several energy, environmental and agriculture experts, including David Morris, who served as an adviser and consultant to the energy departments of presidents Gerald Ford, Jimmy Carter, Bill Clinton and George W. Bush, and Lee Lynd, a professor of engineering sciences at Dartmouth College who has advised policy-makers regarding biofuels and served on an advisory committee to former President Bill Clinton's administration, are members of FoodPriceTruth.org.

"Something to think about is what will happen if the mandate is removed?" says Coleman, who has been involved with transportation fuels at the regulatory and policy-making levels in California and other states since 1998. "Yes, these companies say the price of food is so high because of biofuels, but nobody is saying that they will lower their prices for consumers if corn prices are lowered, which is silly and won't happen," he says. "What you are going to get by suspending biofuel policies is no impact on corn or international grain prices, but the price of food will increase because fuel prices will rise."

Coleman says these big food companies are simply pretending to be on the side of consumers. "These are the same companies who have been shrinking the boxes of their products, and charging customers the same price or more," he says. "They are profiting at the hands of a crisis. This whole thing is about money to them."

Regarding food needs, Coleman says it shouldn't be a concern. "Anyone who knows anything about agriculture or hunger knows that farms are not at full capacity—the whole idea that the agriculture sector is operating beyond their means, and that is the cause of world hunger, is absurd," he says. "Trade allocations and poverty among other factors cause world hunger."

The Renewable Fuels Association, Canadian Renewable Fuels Association and the European Bioethanol Fuel Association agree. "The world's farmers can meet the challenges of today's crisis," the associations wrote in a letter to Food and Agriculture Organization General Director Jacques Diouf and other world leaders in June. "The world does not lack for arable land or highly efficient food production methods. What it lacks are sound international agricultural policies that allow farmers, especially in food importing countries, to meet the food demands of their fellow citizens. Increasing the production of food and expanding biofuel production are not mutually exclusive activities. They are complimentary." The organization also added that the two commodities most often associated with today's food crisis are wheat and rice. "Neither commodity is a major source of biofuel production, nor are they competitors for acres with corn and other biofuel feedstocks," according to the letter. "You do not produce corn or sugarcane in a rice paddy. The factors driving the price of wheat and rice higher are independent of efforts to develop a biofuels industry. These include weather-related problems, rising demand and the price of oil."

Hidden Agendas?
The Houston Chronicle recently discovered, after obtaining 596 pages of records from the Texas governor's office through the Texas Public Information Act, that six days before Perry requested the 50 percent RFS waiver from the U.S. EPA, Texas poultry producer Lonnie "Bo" Pilgrim donated $100,000 to the Republican Governors Association. The association is chaired by Perry. The EPA has not made a ruling on the request, but has received more than 10,000 comments. Pilgrim, who is the founder, chairman and principal owner of Pilgrim's Pride the largest chicken producer in the United States, was later allowed to speak to several Republican governors during a private energy conference in Grapevine, Texas. In a letter in support of Perry's waiver request Pilgrim had this to say, "Soaring feed-ingredient costs fueled by the federal government's ethanol mandate has created a crisis in our industry, the true effects of which are only just now beginning to be felt by consumers in Texas and other states in the form of higher food prices." Pilgrim's Pride currently owns 25 percent of the U.S. poultry market, and earned a gross profit of nearly $294 million in 2007.

Coleman isn't surprised that the poultry industry is pushing for the waiver. "Factory farms and the chicken and livestock industries have built their empires on the backs of cheap corn, and have made billions as a result," he says. "They enjoyed paying low prices; now they are going to spend millions beating up ethanol." The high cost of poultry and livestock feed has prompted several producers to join the anti-ethanol campaign.

Coleman says biofuels supporters should speak up, talk to legislators and make their voices heard. Although it may not have reached everyone yet, the truth is emerging on its own, he says.

Anna Austin is an Ethanol Producer Magazine staff writer. Reach her at aaustin@bbiinternational.com or (701) 746-4968.