New Reports Examine Corn-Ethanol-Food Price Connections (8-8-07)

A trio of new studies is shattering the myths about the relationship between the price of corn, ethanol production and food prices. The National Corn Growers Association (NCGA) sees the studies as proof that agriculture can continue to meet the nation’s growing demand for both food and fuel.

Taken together, the reports, from the Center for Agricultural and Rural Development (CARD) at Iowa State University, the Consumer Federation of America (CFA) and Houston Biofuels Consultants LLC, show that higher corn prices have little effect on either food or fuel prices.

NCGA did not participate in or provide funding for any of the studies.

“The CARD report repeats the conclusions it had reached in its study earlier this year,” said NCGA Vice President of Public Policy Jon Doggett. “However, some people misinterpreted that study’s findings, because it included a ‘worst-case scenario.’ This report is very clear – a 30 percent increase in corn prices would increase consumer food prices by only about 1.1 percent.”

The CFA study includes a stinging criticism of the oil industry for failing to use ethanol as a way to increase supplies of refined gasoline. The study notes increased use of ethanol could actually help reduce food price increases. “High energy prices cause higher food prices,” says CFA director of research Marc Cooper. “(T)he historic corn-crude price relationship will cushion the impact that ethanol production has on food prices.”

The report also said, “Based on the historical relationship between crude [oil] prices and corn prices, current prices for corn are lower than one would predict,”.

Houston Biofuels Consultants comes to much the same conclusion. “Historically, ethanol prices haven’t tracked corn prices,” it notes in the July issue of Ethanol Producer Magazine.

Click here to read the CARD report.

Click here to read the Consumers Federation of America Report.

Click here to read the Houston Biofuels study in Ethanol Producer Magazine.