Commenter: Cost of fuel, not grain, is the problem.
June 23, 2007
Via the contact form, a reader who identifies himself as a financial consultant for the ethanol industry said, and gave me permission to share, the following:
Your post regarding the increased cost of food resulting from higher corn prices is lacking. The price of the raw corn in most food products is insignificant when compared to the cost of advertising, transportation, packaging, legal, middlemen profits etc. I come out of the egg industry. The cost increase we have experienced in our industry are actually .08/dz. Do you honestly think that the American consumer will be materially effected by these kinds of increases when they don’t bat an eye to pay an additional $1 pack for cigarettes as mandated by state governments. The American farmer has been selling corn in the $2/bushel range for 40 years until recently. If corn were inflation adjusted beginning in 1970 we would actually be paying as a society something over $6/bushel today. In all other areas of the economy (health care, auto costs, education, products and services have received dramatic inflation increases. Don’t lay the increased cost of food on the corn farmer when the raw product only makes up a small portion of the cost.
I think it’s a fair point, but I’m still concerned that the ethanol mandates and concomitant grain price increases will encourage more farm consolidation and less sustainable farming practices. Now I don’t want to let perfect become the enemy of good, but I would like to make sure we’re getting a net benefit.
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June 24th, 2007 at 10:05 am
Ethenol production is just one of the reasons why food prices are rising.At http://www.peakfood.co.uk we believe that oil and gas shortages, water shortages,desertification, land being paved over for new cities and roads, collapsing wild fish stocks, and extreme weather events such as droughts and floods could combine to eventually cause famine.
By 2025, world population will have risen to 8 billion and millions more in Asia expect a diet with more meat, which needs more land per capita when we will have less.
The west is especially vulnerable because our farming is totally dependent on the finite resources of oil and gas. Not a good idea if we hope to be fed forever.
June 25th, 2007 at 6:21 pm
I’d like to make a joke about being dependent for our fuel on a region dominated by theocratic fundamentalists, but I’m a conservative, so I can’t.