A new report released by the Congressional Budget Office last week says the increased use of ethanol is not the main reason for higher food prices.
According to “The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions,” the CBO estimates that from April 2007 to April 2008, the rise in the price of corn resulting from expanded production of ethanol contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices measured by the consumer price index. Over the same period, certain other factors, like higher energy cost, for example, had a greater effect on food prices than did the use of ethanol as a motor fuel.
The report goes on to say that beyond the one-year period that ended in April 2008, food prices are likely to be higher than they would have been if the United States did not use ethanol as a motor fuel.
However, report authors say ethanol’s effect on future food price inflation is uncertain because the forces determining that impact move in opposite directions. Federal mandates now in place require additional use of ethanol in the future, which would continue to put upward pressure on prices. In contrast, increases in the supply of corn from cultivating more cropland, increasing crop yields or improving the technology for making ethanol from corn or other feedstocks would tend to lower food prices.
Click here for the full CBO report.