Corn is used as the feedstock for approximately 98% of the ethanol produced in the United States. Brazil uses sugarcane as a feedstock, while China is focusing on using cassava and sweet potatoes as feedstocks for ethanol production. USDA estimates that 3.2 billion bushels of corn (or 24% of the 2007 corn crop) will be used to produce ethanol during the September 2007 to August 2008 corn marketing year. In January, 2002, the price for a bushel of corn was $1.98. In July, 2008, the price for a bushel of corn was $5.61.

Corn is a significant ingredient for meat, dairy, and egg production. However, while increased ethanol production is partially responsible for the increase in corn prices, the real factors driving up retail food prices are: rising demand for processed foods and meat in emerging markets such as China and India; droughts and adverse weather around the world; commodity market speculation; export restrictions by many exporting countries to reduce domestic food price inflation; the declining value of the dollar; and skyrocketing oil prices.

Record high prices for diesel fuel, gasoline, natural gas, and other forms of energy affect costs throughout the food production and marketing chain. Higher energy prices increase producers’ expenditures for fertilizer and fuel, driving up farm production costs and reducing the incentive for farmers to expand production in the face of record high prices. Higher energy prices also increase food processing, marketing, and retailing costs. In 2005, the most recent year for which data are available, direct energy costs and transportation costs accounted for roughly 8 percent of retail food costs. These higher costs, especially if maintained over a long period, tend to be passed on to consumers in the form of higher retail prices.

Historically, food prices have surged during times of higher crude oil prices. Moreover, research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute 5.2 percent to retail food prices.

Please feel free to visit the Renergie weblog (www.renergie.wordpress.com) for more information.

Corn is used as the feedstock for approximately 98% of the ethanol produced in the United States. Brazil uses sugarcane as a feedstock, while China is focusing on using cassava and sweet potatoes as feedstocks for ethanol production. USDA estimates that 3.2 billion bushels of corn (or 24% of the 2007 corn crop) will be used to produce ethanol during the September 2007 to August 2008 corn marketing year. In January, 2002, the price for a bushel of corn was $1.98. In July, 2008, the price for a bushel of corn was $5.61.

Corn is a significant ingredient for meat, dairy, and egg production. However, while increased ethanol production is partially responsible for the increase in corn prices, the real factors driving up retail food prices are: rising demand for processed foods and meat in emerging markets such as China and India; droughts and adverse weather around the world; commodity market speculation; export restrictions by many exporting countries to reduce domestic food price inflation; the declining value of the dollar; and skyrocketing oil prices.

Record high prices for diesel fuel, gasoline, natural gas, and other forms of energy affect costs throughout the food production and marketing chain. Higher energy prices increase producers’ expenditures for fertilizer and fuel, driving up farm production costs and reducing the incentive for farmers to expand production in the face of record high prices. Higher energy prices also increase food processing, marketing, and retailing costs. In 2005, the most recent year for which data are available, direct energy costs and transportation costs accounted for roughly 8 percent of retail food costs. These higher costs, especially if maintained over a long period, tend to be passed on to consumers in the form of higher retail prices.

Historically, food prices have surged during times of higher crude oil prices. Moreover, research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute 5.2 percent to retail food prices.

Please feel free to visit the Renergie weblog (www.renergie.wordpress.com) for more information.

When a bushel of increased to $3.40 in 2007, the price of the corn in a box of cereal increased to 4.9 cents.

The result of this was a 0.5% increase in the total cost of the box of cereal, even though corn prices increased by 49%.

When a bushel of increased to $3.40 in 2007, the price of the corn in a box of cereal increased to 4.9 cents.

The result of this was a 0.5% increase in the total cost of the box of cereal, even though corn prices increased by 49%.

I work for a mid-sized trucking company. We have tried the futures for fuel (diesel, not gasoline), and won some and lost some. We don’t go that route anymore, and it’s not commonplace in the industry.

Good commentary across the board here from Ross, Jon, and Larry. I don’t expect the food prices to drop any time soon, if at all, for the various reasons listed above. This report, combined with other evidence, will help validate the industry’s argument that the grocery industry threw this out there as an excuse to raise prices….meanwhile they threw the ethanol industry under the bus with the media and general public.

I’m also all for conservation and 2nd generation biofuels, but corn ethanol is an amazing story, and a huge win for our economy, environment, and national security.

I work for a mid-sized trucking company. We have tried the futures for fuel (diesel, not gasoline), and won some and lost some. We don’t go that route anymore, and it’s not commonplace in the industry.

Good commentary across the board here from Ross, Jon, and Larry. I don’t expect the food prices to drop any time soon, if at all, for the various reasons listed above. This report, combined with other evidence, will help validate the industry’s argument that the grocery industry threw this out there as an excuse to raise prices….meanwhile they threw the ethanol industry under the bus with the media and general public.

I’m also all for conservation and 2nd generation biofuels, but corn ethanol is an amazing story, and a huge win for our economy, environment, and national security.