Colorado Corn

In advance of a Senate hearing Thursday afternoon on the impact of corn ethanol on food prices, two cabinet secretaries outlined research that demonstrates not only the minor influence biofuels play on retail food prices, but the degree to which they also help keep fuel costs down.

Agriculture Secretary Ed Schafer and Energy Secretary Samuel Bodman prepared their joint response at the request of Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, whose oversight hearing will look into the “relationship between U.S. renewable fuels policy and food prices” as part of the committee’s “ongoing efforts to become better informed on the complexities of the ‘food-vs.-fuel’ fuss,” as the committee announcement called it.

“It is clear that biofuels are already moderating gasoline prices,” Schafer and Bodman write. “That impact is likely to grow substantially as more biofuels come to market. Our preliminary analysis further suggests that current biofuels-related feedstock demand plays only a small role in global food supply and pricing. Moreover, the impact of biofuels on U.S. consumers is even smaller since the farm price of commodities accounts for less than twenty percent of U.S. consumers' food costs.”

They further state:

Ethanol and biodiesel consumption accounted for approximately 4 percent to 5 percent of the overall rise in retail food prices.
In the absence of any growth in biofuels production in the United States, the global food commodity price index would have risen by 40.6 percent to 42 percent, as opposed to 45 percent.
If we had not been blending ethanol into gasoline, gasoline prices would be between 20 cents to 35 cents higher.