Food prices

May 07, 2008 05:45 am

— Folks are trying to blame ethanol and biofuels for causing increases in food prices in the United States. Why? Because ethanol and biofuels are produced from corn and soybeans. But there is more to the story.
According to the USDA, for every dollar spent at the grocery store, 19 cents goes to the farmer, almost 40 cents to labor, 16 cents to packaging, transportation and energy. Less than 10 percent of the U.S. corn crop is used for corn-based food consumed by humans: corn meal, corn starch, corn syrup and corn flakes. Frozen and canned sweet corn is completely different than the corn (grain) used for ethanol, and is not impacted at all. Today's corn prices at $5.50 a bushel translate into 7.9 cents going to the farmer for each 18 ounce box of corn flakes.
Increased demand for corn to produce ethanol is not a major factor influencing higher milk prices. Feed costs are not part of the formula that determines the price of milk, so there is no direct way for dairy farmers to pass on their costs to consumers.
Oil prices have increased over the past four years from $35 to more than $110 per barrel. High energy prices bring higher production costs for farmers to plant and grow grain.
Three things are driving current world food prices. A drought in Australia, a major grain exporter, surging oil prices raising the cost of transportation, and the expanding demand for food in China and India. The weakening American dollar makes U.S. agricultural and food products much more desirable for purchase by other countries, increasing the demand for products and raising the cost.
American food is still the best value in the world. Americans spend a smaller percentage of their income on food than any other nation. The same cannot be said of crude oil. Technology will continue to increase corn yields in the short term, and lead to new ways of producing renewable fuels in the long term.
Glenda Strouse,
Northumberland
n Glenda Strouse is president of the Northumberland County Farm Bureau.