Food prices are on the rise and so are ocean levels due to global climate change. As a green fuel alternative, some environmental advocates praise corn-derived ethanol as the answer for carbon dioxide emissions. On the other hand, some are widely against using corn for ethanol and offer a pro-food argument that suggest corn should be reserved for nutrition alone. Despite concern for associated food problems regarding corn syrup diabetes and its nutrition, the Food vs. Fuel debate holds a weight of its own. This argues whether or not a crop should be used for food or fuel.
In the past, anti-ethanol advocates attempted to link rising corn prices and ethanol production with rising food prices. Within the past two years, the price of corn has dropped with continued ethanol production, yet the cost of food continues to rise. Essentially, even if the price of corn decreases by 50%, that doesn’t mean that the price of corn flakes will also drop 50% in explaining how land utilized to grow crops for fuel rather than food would be the exact reason for rising food prices. The process that determines the price of food is not that simple. Many factors go into the price of corn flakes on the supermarket shelf. Price discrepancy when considering corn products comes from the price of oil needed for the transportation and manufacturing of foods and the world’s demand for food. So, before accusing ethanol production as the culprit for rising food prices, more factors should be analyzed.
While ethanol’s role in rising food prices is questioned, the rising cost of oil is positively correlated with the rising cost of food. However, the cost of oil is highly variable. According to Kimberly Amadeo, president of WorldMoneyWatch.com, a group that analyzes the economy and formulates business plans for major international corporations, there are three major factors that determine the cost of oil. The first factor relates to traders’ bids to buy oil at an agreed upon price based on certain criteria. This criterion includes the output of oil, access to future supplies and oil reserves, and U.S. oil demand. The Organization of Petroleum Exporting (OPEC) sets prices high enough to keep oil exportation profitable for all countries while limiting available supply (In the past month, the U.S. has significantly dropped oil prices due to the heavy onset and implementation of fracking practices). To determine projected U.S. oil demand, the U.S. Energy Information Administration gathers data to predict nationwide seasonal oil use, which is continuing to rise. In effect, as current demand rises and supply remains constant, the price of oil will also increase simply due to higher oil/gasoline use rather than from ethanol production and these fracking measures cannot be permanent or sustainable.
The second and third factors are less related to consumer use, but more due to international developments and accidents in the world. In response to world crises such as the 2012 Iranian nuclear weapon scare, the U.S. and E.U. placed financial sanctions on Iran, which limited the worldwide supply of oil. As a result, gasoline prices rose to nearly four dollars/gallon, and indirectly raised the price of food through higher transportation costs. Mother nature can also be unpredictable in terms of her destructiveness. In 2005, Hurricane Katrina, which affected 19% of U.S. oil production, hit the U.S. and gas prices rose to five dollars per gallon. It is apparent that the price of oil is very volatile and as it continues to rise, it will also continue to drive the price of food up.
What should be explored more is ethanol’s disassociation with food prices. In 2012, the U.S. Environmental Protection Agency denied to waive the Renewable Fuel Standard program (RFS) which pushed for increased corn-ethanol production because, after examining 500 scenarios involving corn, food, and fuel prices, 89% of them saw no negative impact from the RFS. However, corn is government subsidized and the leading and most-used food product in the U.S. Corn’s conversion into biofuel may not detract from its conversion into what it is primarily used for: corn syrup. While some may be quick to point out that all corn produced should be used as food and thus solve the worldwide food shortage epidemic, the UK Department for Environment Food and Rural Affairs says otherwise: “Biofuel policy tends to increase the aggregate supply of grains in any given production year and, in principle, this could be a stabilizing influence.” Even if crops are not used directly to feed people, having increased ethanol production may ensure greater food price security, stability, and food accessibility to the majority of the population.
Furthering the disconnection of food prices, the annual rate of corn used for ethanol and the annual rate of food inflation rise at different speeds, 1.1% and 2.7%, respectively. According to the U.S. Department of Agriculture, Economic Research Service sector, between 2002 and predicted values for 2014, there has been a dramatic increase in corn use for ethanol (4450 million additional corn bushels).
It is evident that even as ethanol production rates markedly rise, differences in food prices do not rise at the same rate, casting the entire system into a state of further question. The food/ethanol equation is not fully understood and corn’s impact on the soil and the economy has not been formerly studied. As a result, congress should be pressured to do research on corporations and gather data. Until enough data is collected, action should be seized because any measures taken may polarize the situation.
Amadeo, Kimberly. “Why Are Food Prices Rising?” 24 Nov. 2014. Web. 17 Feb. 2015. <http://useconomy.about.com/od/inflationfaq/f/Why-Are-Food-Prices-So-High.htm>.
Amadeo, Kimberly. “What Factors Determine Oil Prices?” How Are Oil Prices Determined? 1 Feb. 2015. Web. 17 Feb. 2015. <http://useconomy.about.com/od/commoditiesmarketfaq/f/oil_prices.htm>.
“Corn, Ethanol, and Food Prices.” National Corn Growers Association. 3 Feb. 2014. Web. 18 Feb. 2015.
“USDA ERS – Food Dollar Series: Documentation.” USDA ERS – Food Dollar Series: Documentation. 24 May 2014. Web. 18 Feb. 2015.