Chicken Little

Posted 10 January 2013 in

National

The poultry industry is once again trotting out untruths when it comes to food prices, so it’s time to take a closer look at the author behind their latest collection of “facts.”

In a recent study, Dr. Thomas Elam is repeating the same tired arguments about food prices we’ve all heard before. This is unsurprising, given that his methodologies have been questioned in the past. EPA took him to task back in 2008 saying that his modeling around impact of the renewable fuel standard did “not appear to accurately reflect market forces” and that EPA did not find the analysis “plausible.”

Even more telling is the company Elam keeps: his colleagues at the Center for Global Food Issues claim to conduct research on environmental issues and food production. But that’s hard to swallow when they avidly deny climate change (for instance, claiming that tropical rainbelts shift every few hundred years). Climate change is arguably the biggest threat to food production, affecting global temperatures, drought and water supplies.

Oil is one of the biggest global warming culprits. With 2012 topping the charts as the warmest year ever for the U.S., it’s time to get real about the connection between oil, climate change, and food costs.

Let’s take a look at the facts:

Fact: Oil prices drive food prices – and global food prices are dropping

Energy costs – along with labor, marketing and packaging – are the main driver of food prices, plain-and-simple.

The vast majority — 84% — of food costs are derived from non-farm costs, according to the USDA and the Economic Research Service. (And it’s not just ERS: the United Nations has raised the alarm about the impact oil prices are having on our food prices.) That means just 16% of the dollar that someone spends at the grocery store goes to pay for all of the different crops that made the food they’re buying. And out of that 16%, just 3% is for corn (Elam himself notes in the study that “corn is just one of many basic farm inputs used to produce the U.S. food supply.”)

Because of the major oil-based inputs to food prices, oil prices ultimately drive food prices, not ethanol. What’s more, when you look at food prices on a global scale, they’re actually dropping, according to the latest UN figures and information from the US EIA and BLS:

(Sources: EIA and Bureau of Labor Statistics)

When you know the facts, this line from Elam is particularly suspect: “other than major increases in corn production . . . the only other possibility for food affordability relief is to revisit the RFS, and lower ethanol production incentives.”

Reducing the cost of oil – both as a food cost input and as a driver of household costs for Americans – would be a great place to start to make food more affordable.

Between 2009 and 2011, average household spending on gasoline jumped nearly 44% according to a Bureau of Labor Statistics data, while spending on food at home was nearly flat, up just 1.0%.

Which brings us to our next fact . . .

Fact: Ethanol saves families money

Renewable fuel helps to lower the price of fuel, the key driver in food prices. An Iowa State University study found that in recent years, ethanol has cut gasoline prices by $0.89 per gallon from where they otherwise would have been. Overall, Americans saved $50 billion on imported fuel costs in 2011 thanks to renewable fuel. Renewable fuel has also driven a $500 billion increase in America’s farm assets since 2007, supporting our nation’s farmers and struggling rural economies.

Fact: Ethanol does not use nearly as much of the corn crop as people think

The “40% myth” is just that – it’s a myth, and it’s wrong.

Ethanol is produced from a different type of corn than the crop that people eat. This field corn, fed to livestock, delivers two beneficial products – the ethanol itself from the starch portion of the kernel – and the remaining part of the plant, with nutritious fiber, protein and more, is turned into valuable livestock feed.

When you look at both products, only 16% of the net corn crop goes to ethanol.

Worldwide, the vast majority – more than 90% – of the corn crop is available for non-ethanol use.

Elam not only ignores the reality of how global food prices have changed over time, but the central role that oil plays in those prices. Prices at the pump are what’s really eating into American’s paychecks, not ethanol.

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Chicken Little