Grocers, fast food shops blame ethanol for higher food prices

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As the debate on ethanol continues, food retail companies have picked a side claiming government subsidized corn-based ethanol is to blame for higher food prices.

As drought conditions have eased, higher corn yields are expected in 2013. The higher production and lower corn costs have livestock producers and ethanol plants amping up production, which, in turn, raises the demand for corn.

dollar sign Some fast food companies say the increased demand for corn brought on by ethanol plants is the reason menu prices, namely beef, pork and chicken, are higher.

"It's harder every day to offer great value because our costs are skyrocketing," Lisa Ingram, president of White Castle, recently said in Washington. "In fact, since the RFS became law our cost for beef has increased by forty-seven percent."

Fox News reports the sentiment is mimicked by Wendy’s franchise owners. Ron Ross, owner of four Wendy’s restaurants in southern California, says an industry study found higher costs, supposedly impacted by the RFS, have taken $25,000 in revenues from each of his stores.

Because competition limits how much of the costs can be transitioned to customers, Ross says he’s had to cut back on employee bonuses and delay new store plans.

Higher beef prices can’t be blamed solely on increased corn demand created by ethanol plants. Two consecutive years of drought forced cattle herds to shrink to a 60-year low, which pushed wholesale beef prices to record highs earlier this summer.

Bob Dinneen of the Renewable Fuels Association told Fox News some companies are using the RFS as a scapegoat and the real culprit is higher oil prices which increase the cost of transporting commodities.

The Renewable Fuels Association says average corn yields have increased by 36 percent over the past 20 years and those averages could rise another 29 percent by 2020.  

The association says the ethanol process utilizes only the abundant, low value starch and creates a high-value livestock feed as a byproduct sold to producers.

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Suka Madek    
Chicago  |  August, 02, 2013 at 06:18 AM

If the RFS mandate were repealed the ethanol industry would be gone tomorrow. What other industry do you know that goes out of their way to insult and demean their customer (Petroleum companies and feed industry)? They need to throw a bucket of water on the biofuels industry and like the witch in the wizard of Oz you would here it scream "I'm melting!"

Sue Schulte    
Kansas  |  August, 05, 2013 at 02:43 PM

So, corn production is increasing, and that has lowered corn prices; but lower priced abundant corn has boosted demand, (but not increased corn prices), but somehow food companies' costs are increasing because we are using more corn, (at lower prices). I guess I don't follow their reasoning. At least when we buy our energy from the Middle East we know exactly why our fuel prices go up-- because they feel like it.

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