A new study by Informa Economics looked through over twenty years of data to establish the true effects of the increases in ethanol production and the resultant increased demand for corn on the consumer price of food items.
The report finds that rising food costs are largely due to rising energy prices and increased global demand.
The Informa report identifies the so-called “marketing bill”—the portion of final food costs that excludes grains or other raw materials—as a key driver of the consumer price index (CPI) for food, largely due to rising energy and transportation costs. Another significant factor in consumers’ food bills is surging global demand for commodities.
The report concludes that there is not a solid cause and effect relationship between corn prices and rising food prices.
“While there have been a number of stories in the media over the last year indicating that consumer food prices are being driven higher by an ethanol-induced increase in corn prices, there is little evidence of such a simplistic cause-and-effect linkage. … While an increase in corn prices will affect certain industries – for example, causing livestock and poultry feeding margins to be lower than they otherwise would have been – the statistical evidence does not support a conclusion that there is a strict ‘food-versus-fuel’ tradeoff that is automatically
driving consumer food prices higher.”
Informa Press Release
And these findings are consistent with another study released in June 2007 by LECG.