An interesting essay on food prices

From Linda Chavez writing at Town Hall magazine

A Government Engineered Food Crisis
As if a housing crisis, rising energy costs and a soft labor market weren't enough to cause economic anxiety for the average American, now consumers are feeling the pinch of rapidly escalating food costs. The United States has long prided itself in being the breadbasket of the world, and Americans have traditionally paid a smaller share of their income on food than citizens of other developed countries. But the days of cheap milk, bread, beef and poultry may well be over -- and Uncle Sam is partly to blame.

In 2007, the cost of a gallon of milk increased 26 percent; eggs went up 40 percent; and a loaf of white bread went from $1.05 to $1.28 from 2006 to 2008. Steep increases in the price of oil have contributed to these higher costs, but the federal government has played a pernicious role as well. By mandating that oil companies increase the amount of ethanol they blend with gasoline, the government has not only artificially increased the cost of corn, which is what most U.S. ethanol is made of, but has driven up the cost of other grains as well.

And a bit more:

But what is most galling about the impact of government mandated ethanol production is that it does little or nothing to solve our energy problems. Ethanol proponents argue that it is cleaner than petroleum -- which improves air quality -- and that it and other alternative fuels will reduce U.S. dependence on foreign oil. Both claims are dubious.

Corn-based ethanol is inefficient as a fuel for automobiles, reducing vehicle gas mileage by 20-30 percent in vehicles using E85, the highest ethanol content fuel. Fewer miles-per-gallon of gas essentially eliminates any savings achieved, even by mixing ethanol with gasoline in the lower 9 percent ethanol blends required in all U.S. gasoline today. And of course, it also takes energy to produce ethanol -- for farming and distilling the corn and transporting the final product to the pump -- and much of that energy will come from carbon-based fuels.

And finally:

If ethanol really were the miracle fuel its proponents claim, you'd think there would be huge profits in producing it in the free market. But that's not the case. Consumers not only pay for ethanol at the pump, they're paying taxes as well to subsidize ethanol production in the U.S. -- and they're paying a hidden tax to keep cheaper, foreign sugar cane ethanol from competing with the domestic corn-based product. Subsidies to gasoline blenders amount to about 51 cents per gallon, and the government imposes a 54-cent tariff on foreign ethanol so that it can't provide a cheaper alternative for U.S. consumers.

And matters will only get worse as government mandates higher bio-fuel content in U.S. gasoline from the current 9 percent to 15 percent by 2015. Ethanol won't solve the energy crisis, but it may well lead to a food crisis in the U.S. and elsewhere. The U.S. Agency for International Development reports that the cost of providing wheat, corn, cereal and other foodstuffs to poor nations has gone up 41 percent since October 2007, which will mean we can provide less assistance to starving people around the world. Federal policy is literally diverting food from the table to the gas tank -- and it's time we stopped it.

Pretty much hits it on the head. A powerful lobby promoting something falsely and causing a massive rise in food prices. Ain't politics grand... And this little item came up on another forum -- Indiana is one of the prime corn producing states and the Indiana Sierra Club is not thrilled. Here is their manifesto:

The Problems With Ethanol
When it comes to corn-based ethanol, what seems good for farmers may not be so good for everyone else. In the past year, the global price of corn has doubled. Because corn is the most common animal feed, the price of milk also has nearly doubled, with the price of butter in Europe increasing by 40%. Pork prices in China are up about 20%. And in Mexico, a 60% rise in the cost of tortillas has led to riots. Global grain consumption has exceeded production in the last six years, resulting in the world grain reserve dwindling to about 60 days, the lowest level in 34 years.

Adding insult to injury, corn is not even an efficient source of ethanol. Each unit of energy put into corn-based ethanol production produces only 1.3 to 2 units of energy in return. On the other hand, cellulosic plants (corn stalks, straw, biomass) produce 4 to 6 units of energy. Sugar cane produces up to 8 units. This is all good food for thought as we consider how to use our resources. Perhaps we should ask more insistently whether we can afford to give tax subsidies to the corn-based ethanol industry.

Glad to see that they are seeing the consequences of this.