The Food or Fuel Strawman Argument

Field corn is the predominant corn type grown in the U.S., and it is primarily used for animal feed. Currently, less than 10 percent of the U.S. field corn crop is used for direct domestic human consumption in corn-based foods such as corn meal, corn starch, and corn flakes, while the remainder is used for animal feed, exports, ethanol production, seed, and industrial uses. Sweet corn, both white and yellow, is usually consumed as immature whole-kernel corn by humans and also as an ingredient in other corn-based foods, but makes up only about 1 percent of total U.S. corn production.

Since U.S. ethanol production uses field corn, the most direct impact of increased ethanol production should be on field corn prices and on the price of food products based on field corn. However, even for those products heavily based on field corn, the effect of rising corn prices is dampened by other market factors. For example, an 18-ounce box of corn flakes contains about 12.9 ounces of milled field corn. When field corn is priced at $2.28 per bushel (the 20-year average), the actual value of corn represented in the box of corn flakes is about 3.3 cents (1 bushel = 56 pounds). (The remainder is packaging, processing, advertising, transportation, and other costs.) At $3.40 per bushel, the value is about 4.9 cents. The 49-percent increase in corn prices would be expected to raise the price of a box of corn flakes by about 1.6 cents, or 0.5 percent, assuming no other cost increases.

In 1985, Coca-Cola shifted from sugar to corn syrup in most of its U.S.-produced soda, and many other beverage makers followed suit. Currently, about 4.1 percent of U.S.-produced corn is made into high-fructose corn syrup. A 2-liter bottle of soda contains about 15 ounces of corn in the form of high-fructose corn syrup. At $3.40 per bushel, the actual value of corn represented is 5.7 cents, compared with 3.8 cents when corn is priced at $2.28 per bushel. Assuming no other cost increases, the higher corn price would be expected to raise soda prices by 1.9 cents per 2-liter bottle, or 1 percent. These are notable changes in terms of price measurement and inflation, but relatively minor changes in the average household food budget. http://www.ers.usda.gov/AmberWaves/February08/Features/CornPrices.htm

Before Ethanol, the government paid farmers to rot (did I mean store?) their corn in huge bins all over the midwest. The price was subsidized by the government. It was not pretty. But no one went hungry due to the price of corn.

After Ethanol, the market has used excess corn to clean the air and fuel America. It is the engine that drives the American farm economy. The national, state and local governments reap the increased revenues of rural prosperity. But still no one goes hungry due to the price of corn.

SkunK