Fuel vs. Food: Is it Rhetoric or Reality?

Hardly a day passes without reading an article or hearing a report that higher corn prices, due to the increased fuel demand for ethanol, are causing higher food prices. Yet these articles and reports are generally vague about the specific connection. In fact there is little, if any, evidence that higher corn prices have influenced consumer food prices to date.

Back in November this author published an article looking at the possible impact of ethanol and higher corn prices on food prices. The basis for the article at that time was an economic analysis done in conjunction with the Food and Agriculture Policy Research Institute (FAPRI) that showed little impact from ethanol on food prices in 2006 and 2007 and then a 0.2% rise in the food CPI price index 2008. In 2009, the food CPI would rise 0.5% and then the next three years the food CPI would be 0.7% higher then would otherwise be the case.

For the rest of story click on link. By Terry Francl Senior Economist
American Farm Bureau Federation http://www.ncga.com/ethanol/pdfs/2007/071007_RhetoricVersusReality.pdf