April 17, 2008

Grocery Manufacturers Association Criticizes Ethanol

GMA accuses ethanol of increasing food pricesThe Grocery Manufacturers Association issued a press release yesterday criticizing ethanol production for driving up food prices.

Today the United States Bureau of Labor Statistics released CPI data for March 2008, showing food and beverage prices rising at an annualized, seasonally adjusted rate of 5.1 percent for the first three months of 2008. The unadjusted percent change for all food and beverage over the past year is 4.4 percent. This data follows the release of the Producer Price Indexes (PPI) on Monday, which showed that finished food prices are rising at twice the rate of all other finished goods prices.

Scott Faber, vice president for Federal Affairs at the Grocery Manufacturers Association also had this to say.

“Federal food-to-fuel mandates have led to over one quarter of corn to be diverted from food to ethanol production, driving up the price of corn and other commodities to historic highs,” said Faber. “The data released today prove that the result has been devastating for American families: cost of food and beverages have risen and annualized rate of 5% over the first quarter of the year. This is an unsustainable pattern that must be addressed; Congress must re-examine food-to-fuel mandates."

First off, last year less than 20% of the corn crop was used for ethanol production. Last years corn crop was about 13.2 billion bushels and about 2.4 billion of that was used to make ethanol. The percentage is even smaller if you consider the amount of distillers grains left over after ethanol production that were put back into the food supply.

This is set up as a cause and effect argument. And while the Consumer Price Index information certainly establishes effect, there is no proof offered up that establishes ethanol as the cause.

Since many economic studies (such as this, this, this, and this) have found that many other factors including higher energy prices play a larger role in food price increases than do commodity prices, I wonder why no mention was made of the fact that energy prices rose at an annualized, seasonally adjusted rate of 8.6% during the first quarter. The unadjusted change for energy prices for the last year was 17.0%. (Source)

Seems like nothing more than misdirection on their part, especially considering the suggested link between them and the oil companies.

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