US officials down play biofuel's impact on food prices

Ethanol production is a contributory factor to rising fuel prices, says the US Department of Agriculture (USDA) - but it isn't as important as you might think.

USDA Secretary Ed Schafer hosted a media briefing this week in which Department scientists analysed the effect of wheat and corn production for the ethanol industry on consumer food prices.

Other factors contributing to the increase in food prices included the growth of the Asian economy, droughts in areas such as Australia, and the imposition of export tariffs by several countries, said USDA chief economist Dr Joe Glauber. He also argued that farm prices contributed no more than 20 per cent to the overall price of food. "A 50 per cent increase in corn prices would raise the CPI less than one percentage point above the normal rate of food price inflation," he said.

Current estimates put price increases for 'food at home' - food purchased at the grocery store - at five to six per cent for 2008, compared to an estimated inflation rate of 3.1 to 3.4 per cent this year.

"There are a number of factors contributing to rising food costs, including oil and gas prices, growing world demand and weather, but of all those food-to-fuel mandates are the only thing Congress can control," said Scott Openshaw, a spokesman for the Grocery Manufacturers Assocation, a trade body that Schafer accused of leading an " underground campaign" against Ethanol.

"Food-to-fuel mandates that were enacted by Congress are playing a significant role in sparking inflation in corn, which is also impacting meat, milk, eggs and many other staples," he said. "We are calling on Congress to revisit and reconsider food-to-fuel policy."

Republican presidential nominee John McCain was among 24 senators who urged the Environmental Protection Agency to reconsider a mandate passed in the Energy Independence and Security Act last December, which demanded 36bn barrels of Ethanol to be produced by 2022.