Washington (Platts)--9Apr2009
Increased use of ethanol in the US accounted for 10-15% of the rise in
food prices between April 2007 and April 2008, according to a study by the
Congressional Budget Office reviewed by Platts on Thursday.
However, over the same period, certain other factors such as higher
energy costs "had a greater effect on food prices than did the use of ethanol
as a motor fuel," said the report released Wednesday.
"The demand for corn ethanol, along with other factors, exerted upward
pressure on corn prices, which rose by more than 50% between April 2007 and
April 2008," the study said. "Rising demand for corn also increased the demand
for cropland and the price of animal feed."
These factors, in turn, raised the price of many farm commodities and,
consequently, the retail price of food, CBO said. Food prices rose by almost
2.5% in 2006, by 4% in 2007, and by more than 5% in 2008.
Beyond the one-year period that ended in April 2008, food prices are
likely to be higher than they would have been if the US did not use ethanol as
a motor fuel, the report said. However, ethanol's effect on future food prices
is uncertain because while federal mandates requiring additional ethanol use
will continue to put upward pressure on prices, increases in the supply of
corn and improved technology for making ethanol would tend to lower food
prices, CBO said.
Research conducted by the Argonne National Laboratory suggests that in
the short run, "the production, distribution and consumption of ethanol will
create about 20% fewer greenhouse gas emissions than the equivalent processes
for gasoline," the report said.
However, if production of ethanol led to converting large amounts of
forests and grasslands new cropland, "Those changes in land use could more
than offset any reduction in greenhouse gas emissions because forests and
grasslands naturally absorb more carbon from the atmosphere than cropland."
--Gerald Karey, gerry_karey@platts.com
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