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Oil Barrel Politics
No. 1699
July 27, 2007

Yes, corn prices today are higher than a year ago.

No, use of corn in the manufacture of ethanol fuel is not a cause for higher food prices.

Yes, the high cost of imported oil and other energy related expenses are a major cause for higher consumer prices. Spiraling energy costs also drive up expenses for farmers who grow corn for food, animal feed or to produce ethanol fuel.

It is convenient, judging from the actions of some, to tell consumers that rising corn costs are to blame for higher food prices but the truth is plain to anyone who purchases gasoline or diesel fuel. The price at the pump tells the rest of the story.

It's hardly fresh news to anyone that petroleum fuel costs have skyrocketed over the past couple of years. This, coupled with our country's lack of infrastructure to produce alternative fuels quickly enough to replace foreign oil, have had costly results for North Carolina, U.S. and global businesses, particularly agriculture.

Not only is the corn market not a chief reason for rising food prices, but use of corn and other plant materials to make ethanol are, in fact, key to finding solutions to better manage consumer prices and help keep inflation in check.

It's simply incorrect to twist farm policy and stretch truth beyond reason to insist that corn prices drive consumer food prices. In reality, the oil barrel plays a greater role in determining business profit, loss and consumer pricing than a silo of corn.

Food, Fuel or Feed?

USDA reports that more corn has been planted across the United States this year than at any time since World War Two. Based on these planting figures, there will be enough corn this year for all purposes–human food, animal feed and fuel. Government analysis indicates 50 percent of the 2006-07 U.S. corn crop will be used for animal feed, 19 percent is bound for export and only 12 percent of the entire nation's corn crop is required for domestic purposes.

At the moment, higher corn prices are a fact of life but the main factor in the up-tick of food prices is high energy and petroleum product pricing that adds cost to all businesses.

Energy independence will be achieved when everyone–whether involved in solving the energy puzzle or helping pay energy's spiraling cost–join the "farm team" to produce renewable fuels made from corn, soybeans and other plant material grown in the U.S.A.