Big Food is Full of Baloney

By Tom Buis | September 12, 2012

Recently, a number of media outlets have been focused on Big Food and their endless calls to waive the renewable fuel standard (RFS) to prevent the rising cost of food. The only problem is that waiving the RFS is unnecessary. Our critics have been propagating misinformation, playing on people’s fears and an Act of God, namely the drought, to make wild assumptions and foolish claims.

No one has said that the current drought the United States is facing won’t have an effect on the agricultural community or food prices. But to attempt to use the drought as a mechanism to pursue a misguided policy agenda is shameless. American family farmers and ethanol producers deserve better.

Corporations like Smithfield Foods are asking America’s grain farmers in a time of need, when crop yields are diminished, to sell their crops at a lower price—completely disregarding the livelihood of the family farmer—to feed their corporate greed, building on the $1.5 billion annual profit from last year. The reality is that Big Food conglomerates are more worried about their own bottom line and they have no intention of passing any savings on to the American farmer or American consumer. If they want more taxpayer dollars to fill their coffers, they should be straightforward and ask, instead of smearing biofuels and taking advantage of a severe drought to mask the real agenda.

Earlier this summer, General Mills CEO Ken Powell estimated that food prices would increase by 2 to 3 percent, compared to an increase of more than 10 percent last year, noting “consumers should see generally stable prices.” The USDA recently predicted that food prices may rise somewhere between 3 and 4 percent by 2013. To suggest that ethanol production is the leading cause of increasing food prices is just plain wrong. Ethanol production has no say over whether it rains or not, so the industry should not be inaccurately accused of rising commodity costs—that is Mother Nature.

Ethanol critics believe that trying to tie rising food costs to ethanol production is a clever way to drive his policy agenda and roll back the RFS. The problem is, the facts do not support the claims. The RFS has been the only successful energy policy this nation has implemented in the past 40 years, and since its enactment, imports of foreign oil have decreased by 25 percent. It is the only energy policy that has helped reduce our dependence on foreign oil and spur economic growth, creating and supporting more than 400,000 jobs.

The RFS is working and was built with a certain level of flexibility to manage difficult times or events, such as this drought. Under the free market, ethanol production has slowed and producers are facing rising commodity prices and tighter margins. With slower production, an 850,000-gallon surplus and 2.5 billion RFS credits available, there is no reason obligated parties cannot meet the 2012 RFS volume goals. The current decline in production, the surplus on hand and the availability of RFS credits, can be equated to roughly 3 billion bushels of corn that will be freed up for livestock and poultry needs.

Big Food neglects to mention energy is used to transport, package, process and store food as it makes its way from the farm to the market—higher oil and gas prices are the true culprits of higher food prices. Additionally, blaming farmers for the cost of their commodity is misguided. When you look at the food dollar, the farmer’s share is only 14.1 cents, the rest is tied up in the marketing share, including those costs to process and bring the products to market.

Big Food’s policy objectives would put America down a path of further dependence on foreign oil from nations like Venezuela and groups like OPEC, costing Americans $360 billion annually and hundreds of thousands of jobs. This would be a mandate on the status quo, denying consumers a choice of a less-expensive, homegrown renewable fuel that is cleaner burning and better for our environment.

For far too many years, Big Food has gorged itself at the trough of government-subsidized corn. If Big Food believes that the government should continue to pay farmers to produce corn at a loss instead of participating in the free market, they should just say so, instead of making unsubstantiated attacks against the ethanol industry—a true American success story that is helping our economy grow and contributing to our energy security.

Author: Tom Buis
CEO, Growth Energy
(202)545-4000
tbuis@growthenergy.org