Corn and Energy Prices

Today the Wisconsin Farm Bureau Federation came out with the following press release:

Study: EnergyPrices, Not Corn, is Rising Food Prices
USAgNet – 06/15/2007

Ethanol critics and many in the media charge that the rising price of corn due to growing ethanol demand is the major culprit for moderately rising consumer food prices. Conspicuously absent from the discussion is the chief reason for increasing food costs: escalating energy costs.

According to a new analysis of food, energy and corn prices conducted by John Urbanchuk of LECG, LLC, “rising energy prices had a more significant impact on food prices than did corn.” Rising energy prices have twice the impact on the Consumer Price Index (CPI) for food than does the price of corn, according to the report.

“Energy costs have a much greater impact on consumer food costs as they impact every single food product on the shelf,” said Urbanchuk. “Energy is required to produce, process, package and ship each food item. Conversely, corn prices impact just a small segment of the food market as not all products rely on corn for production.”

According to the study, “Increasing petroleum prices have about twice the impact on consumer food prices as equivalent increases in corn prices.’

A 33 percent increase in crude oil prices – the equivalent of $1.00 per gallon over current levels of retail gasoline prices – would increase retail food prices measured by the CPI for food by 0.6 to 0.9 percent.

But wouldn’t Ethanol be considered an energy cost? And if so wouldn’t the increase in these cost drive up the production cost of corn for food?

I understand what they are saying but I think that they need to reconsider the wording they use.

Today corn production is no longer just for food but for energy as well and that places the cost of corn into multiple sectors of the economy while only being counted in one.

So my question to all of you is at what point should we consider corn prices similar to other energy costs and not an agricultural food product?

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