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Price increases in commodity markets, 2000-2008
It has been noted by many critics and published in most US newspapers that US ethanol production is causing a rapid escalation in corn prices. Comparing the rise in corn, oil, wheat and rice prices since 2000, using the World Resource Institute and DOE price tables, it can clearly be seen that corn prices, while escalating rapidly, are rising slower than any of the three other food and fuel commodities. In fact, the intensity of price increases is in inverse proportion to the conversion rate into ethanol. Corn, which is used the most among the four commodities as a biofuel, has the lowest price increase. Rice and crude oil, which are not used to make ethanol, have experienced the fastest price increases.
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What’s Behind the Rising Cost of Food?
Many critics point to ethanol as the cause of growing food costs and suggest biofuels standards should be reexamined. What most don’t realize is that ethanol is just a fraction of the impact on food costs. More importantly, without ethanol experts at Merrill Lynch predict gas prices would be 15 percent higher. At today’s average prices, that would push a gallon of unleaded over the $4 mark! Removing ethanol and replacing it with gas would cost Americans alone more than $70 billion. Pulling back on biofuels would only exacerbate the problem.
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