Ethanol production drives up food costs
The 2005 Energy Policy Act requires that 5% of US gasoline needs come from renewable fuels by 2012. We now have 116 working ethanol plants and 79 plants in various stages of construction. Ethanol production is expected to double to 11 billion gallons by year end.
Ethanol plants are expected to use 139 million tons of corn from the ’08 crop. Farmers have produced the third largest crop ever, 10.7 billion bushels. 20% of last year’s crop went to ethanol production making up 1% of the US fuel needs. Corn fields are now replacing other crops as corn becomes more profitable rising to $4.20/bushel double what it was earlier this year, but still behind 1996′s $5/bushel. This has allowed farm subsidies to drop from 20 billion in ’06 to an expected 13 billion in ’07.
Corn production is expected to rise 8% this year with an additional 85 million acres to be planted. The rising prices are pushing out the planting of other crops, soybean prices have already risen 41% and meat prices are expected to rise at least 6% to cover loses being sustained now.
The US food supply was made up of 15% corn products in the 1950s and 1960s. This dropped to 11% in the 1970s and then rose to 17% in the 1980s and to 22% in the 1990s.
An average American spends 10% of his/her income on food down from 15% in the 1970s, 20% in the 1950s, and 25% in the 1930s. Costs are expected to climb. Also the rising price of fuel will be added to the cost of shipping food and ultimately to the consumer.
