March 02, 2008

The Ethanol Excuse Goes International

Ethanol has become the one size fits all excuse for any food price increase in this country. Over the past year it has been blamed for high wheat prices, egg prices, beer prices, and even hay prices. In the case of eggs, corn prices are a small fraction of the overall increase. In the rest of the cases the claims made simply were not correct.

Now it seems as if food manufacturers in other countries are lining up to blame increased prices on ethanol as well, as this article from Australia illustrates.

IT'S bad news for Australians but good news for global warming: the price of baked beans has risen.

Heinz Australia said it has had to put up the price of its baked beans by 5percent because many bean farmers in the United States are switching to corn production to meet the huge demand for ethanol.

Australians eat 116million cans of baked beans a year. The beans are recognised as a healthy source of fibre. Heinz gets all its navy beans - the bean used in baked beans - from the US and Canada and bean prices there rose by 29percent last year.

Bean plantings have fallen by almost half as US farmers cash in on corn prices which have jumped 200percent thanks to the US Government subsidising ethanol as a petrol substitute.

A look back at crop records show that navy beans did go down last year but not by 50%.

Navy Beans Planted Acres

2007 - 221,800 acres
2006 - 280,700 acres
2005 - 236,400 acres
2004 - 185,100 acres
2003 - 158,200 acres

So as you can see last years crop was down compared to the 2006 and 2005, but still a healthy amount planted. And certainly not the 50% loss in acreage suggested by the article. Actual production shows things as being a little closer since the 2007 yield was higher than the 2006 yield.

Navy Bean Production

2007 - 3,771,000 Cwt
2006 - 4,353,000 Cwt
2005 - 3,995,000 Cwt

Looking at it this way suggests that if production was the only factor effecting price then 2007 and 2005 should be about the same.

But was it because of ethanol that navy bean acres went down in 2007? It looks more like it was because of navy bean prices going into the 2007 planting season.

The report also highlights that the U.S. aggregate grower price for all dry beans averaged 13% above a year earlier during September 2006 to January 2007. With the exception of navy beans, the grower price for every major dry bean class is averaging above a year earlier.

Soft prices leading into the 2007 planting season suggests that there was an overproduction in 2006 and that acreage was going to be lost to some other crop anyway.


December 2007 Crop Summary
December 2006 Crop Summary
December 2005 Crop Summary

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