A broad coalition of food industry, environmental and other “grassroot” organizations are calling on President-elect Barack Obama and Congress to enact legislation phasing out subsidies for ethanol production.
Citing a survey the groups commissioned themselves, they said nearly half of the U.S. public “becomes less likely to support policies aimed at promoting the use of corn to produce ethanol” when provided with USDA information that “corn ethanol production is the cause of 10 percent of food price inflation.”
The survey commissioned by members of the Food Before Fuel campaign said nine out of 10 Americans is concerned about the rising cost of food, including 57 percent who say they are “very concerned.”
Officials with the National Corn Growers Association said the coalition statements were more of the same propaganda the Grocery Manufacturers Association and other food industry groups tried to use to discredit ethanol earlier this year. And they questioned why food prices haven't fallen if corn for ethanol production is driving food prices.
“These same ethanol critics are the ones who virtually promised to reduce food prices immediately, and have failed to do so, even though corn prices and energy prices are down by more than half in the last few weeks,” said NCGA President Bob Dickey, a corn producer from Nebraska.
“Food prices remain at a very high level. It's ironic that food companies are reporting record profits, and food prices are higher - for smaller packages of food items, in many cases. When will their prices come down?”
Corn futures went from a high of $7.88 this past June to $3.85 as of Nov. 17, and national average gasoline prices have dropped more than 50 percent since a record high of $4.11 per gallon in July 2008. Prices for cotton, soybean, wheat and other commodities have also fallen significantly since last spring.
Dickey noted that all energy sources in the United States receive some type of incentive for domestic production, including oil, natural gas, coal, wind, nuclear, solar and biofuels. (In contrast to $5 billion for ethanol, oil companies will receive $32.9 billion in subsidies and tax cuts over the next five years.)
At a press conference in Washington Nov. 18, the anti-ethanol coalition claimed that November marks the 30th anniversary of the first government ethanol subsidies, which began in the aftermath of the Arab Oil Embargoes in the mid-1970s.
The coalition members failed to note that declining oil prices and the failure of the U.S. government to follow through on alternative fuels initiatives back then led to a slow climb in oil prices that saw them hitting a peak of $140 a barrel last summer. Many analysts believe oil prices will return to higher levels once the election dust settles.
Livestock groups have been critical of government subsidies, which have helped keep grain prices low until the rising demand for ethanol and last spring's Midwest floods pushed corn, wheat and soybean futures to record levels.
“Ethanol has been on the government payroll for 30 years,” said Joel Brandenberger, president of the National Turkey Federation. “After three decades of government policies subsidizing and supporting the ethanol industry, we find ourselves at the end of 2008 with more questions than ever before about the wisdom of this course.
“On many issues, these groups do not see eye to eye. But we have come together because we all can agree that the government's subsidization of the corn ethanol industry is a flawed policy that pits rural industries against one another, raises food prices for everyone and has failed to yield promised environmental benefits.”
The National Taxpayers Union also weighed in, calling the subsidies for the ethanol industry as a “demonstrative waste of taxpayer money in a time of economic hardship.”
“After 30 years of subsidies, ethanol is displacing only 3 percent of the gasoline we use each year, is likely increasing rather than decreasing greenhouse gas emissions, and is threatening our soil, water and wildlife,” said Craig Cox, Midwest vice president of the Environmental Working Group. “Yet ethanol gets $3 out of every $4 of tax credits the federal government gives to all renewable alternatives including wind, solar and geothermal.”
Dickey agreed that times are difficult for much of the nation's economy. “Our nation's economy is hurting and people are losing their jobs, their homes, and their life savings. This is the wrong time to attack an industry important to rural America.
“Increasing domestic energy production will only help our nation's economy, and the serious drop in corn prices shows there is little connection between expanding ethanol production and raising food prices.”
Dickey said U.S. corn growers are “proud to work hard and be able to meet the demand for corn for food, feed, fuel and fiber. We're also proud of the important role corn ethanol plays in reducing our nation's dependence on foreign oil, in helping protect the environment and in boosting our nation's economy.”
According to the latest USDA forecast, farmers are expected to harvest 12.3 billion bushel harvest of field corn for 2008, the second highest ever. The USDA also reported that the average farm price for corn will be $5.40 per bushel.
Researchers at Purdue University released a study that found that higher oil prices are the predominant factor in higher demand for biofuels and higher corn prices. Three-quarters of the recent increase in the price of corn, they said, was attributable to higher oil prices, and one-quarter was tied to the ethanol tax credit.