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Ethanol raises cost of nutrition programs
Food stamps, child-nutrition plans may require an extra $900 million
Associated Press Writer
Higher use of the corn-based fuel additive accounted for about 10 to 15 percent of the rise in food prices between April 2007 and April 2008, according to the nonpartisan Congressional Budget Office. That could mean the government will have to spend more on food programs for the needy during the current budget year, which ends Sept. 30. It estimated the additional cost at as much as $900 million.
The CBO said other factors, such as skyrocketing energy costs, have had an even greater effect on food prices. CBO economists estimate that increased costs for food programs overall because of higher food prices will be about $5.3 billion this budget year.
Ethanol's impact on future food prices is uncertain, the report says, because an increased supply of corn has the potential to eventually lower food prices.
About one-quarter of corn grown in the United States now is used to produce ethanol, and overall consumption of ethanol in the country hit a record high last year - exceeding 9 billion gallons, according to the CBO. It took nearly 3 billion bushels of corn to produce ethanol in the United States last year, an increase of almost a billion bushels over 2007.
The demand for ethanol was one factor that increased corn prices, leading to higher animal feed and ingredient costs for farmers, ranchers and food manufacturers. Some of that cost eventually is passed on to consumers, because corn is used in so many food products.
Several of those affected have banded together to oppose tax breaks and federal mandates for the fuel. They said Thursday that the report shows the unintended consequences of ethanol.
"As startling as these figures are, they do not even tell the story of the toll higher food prices have taken on working families, nor the impact higher feed prices have had on farmers in animal agriculture who have seen staggering losses and job cuts and liquidation of livestock herds," the Grocery Manufacturers Association, American Meat Institute, National Turkey Federation and National Council of Chain Restaurants said in a statement.
Supporters of ethanol disagreed, saying the report was good news.
"The report released by the Congressional Budget Office confirms what we've known for some time: The impact of ethanol production on food prices is minimal and that energy was the main driver in the rise of food prices," said Tom Buis, CEO of Growth Energy, an ethanol industry group.
Ethanol producers asked the Environmental Protection Agency last month to increase the amount of ethanol refiners that can blend with gasoline from a maximum of 10 to 15 percent, which could boost the demand for ethanol by as much as 6 billion gallons a year. They said raising that cap would create thousands of new jobs.
Agriculture Secretary Tom Vilsack has said he believes the administration could move quickly to raise the cap to at least 12 or 13 percent, but the EPA has not yet decided.
The report also looked at ethanol's effects on greenhouse-gas emissions, concluding that over time, ethanol's benefits over gasoline could diminish. The report says the use of ethanol reduced gasoline consumption by about 4 percent last year and reduced the gases blamed for global warming from the burning of gasoline by less than 1 percent. But the clearing of cropland and forests to produce more ethanol could more than offset those reductions.
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