In 2012, the average U.S. family of four saw a $2,000 increase in food costs, and a significant factor in that increase can be connected to the rise in grain prices, according to a recent report by FarmEcon LLC. Connected to that, says the report, is the use of corn ethanol for fuel.
The renewable fuel standard requires 13.8 billion gallons of corn-based ethanol to be blended into gasoline in 2013, an amount that will use more than 40 percent of the nation's corn crop, according to the U.S. Department of Agriculture. According to Dr. Thomas Elam, president of FarmEcon, corn is just one of many basic farm inputs used to produce the U.S. food supply. However, with increases in biofuel demand and declining corn production, corn prices have increased sharply. In turn, prices of other major crops have also gone up significantly. This ranges from major field crops like soybeans and wheat, to horticultural crops such as potatoes, strawberries and processing vegetable crops. Higher prices for other crops were necessary in order for those crops to compete with corn for land.
"Absent reform, the increasing RFS will continue to pull more and more agricultural commodity tonnage out of the food sector, further driving up food costs, and cause further reductions in food affordability," said Elam in the report. "Food affordability will continue to decline, even if there is no domestic market for additional ethanol production." Elam said he suggests a revisiting of the renewable fuel standard.
