BIO FUELS MANDATE AND FOOD PRICES

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Rising Food Prices a Result of Oil, Not Corn
Corn prices have had minimal impact on rising food prices according to a report released by Texas A&M's Agricultural and Food Policy Center. Instead the study says the underlying force raising the cost of food is higher oil prices, and the cost of groceries like bread, milk and eggs are unrelated to corn prices or ethanol.
"The Texas A&M study dispels the food versus fuel debate," says National Corn Growers Association President Ron Litterer. "This study shows there are many forces creating increases in food costs and ethanol is not a major factor. Clearly, corn is meeting the demands for biofuels."
The report also found that relaxing the Renewable Fuels Standard that calls for the use of 36 billion gallons of renewable fuels by 2022 would not lower corn prices. The ethanol infrastructure is in place and the industry has grown in excess of the RFS, so relaxing it would not lower corn prices.
According to the study, the price of oil that has gone to $100 per barrel is the main factor impacting the agricultural industry and the economy as a whole.

"Ask not what your country can do for you, ask what you can do for your country."
John Fitzgerald Kennedy
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jabber: I agree. See my reply to JAM. Inflation and the devaluation of the dollar has raised the prices of all commodities including crude oil to $115/bbl. The increased price of diesel to $4/gal increases the transportation cost to get the food to the grocery stores. We have $6 corn because of inflation--not because of corn based ethanol. We are exporting 2.5 bil bu of corn. We currently have ending stocks of 1.283 bil bu. There is NO supply shortage increasing the price of corn due to corn based ethanol. If you eliminated ethanol overnight, those acres simply would not be planted. I suppose US corn based ethanol is responsible for $945 gold and the rice shortage is SE Asia too. lol. Best.
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quote:
Originally posted by 48

jabber: I agree. See my reply to JAM. Inflation and the devaluation of the dollar has raised the prices of all commodities including crude oil to $115/bbl. The increased price of diesel to $4/gal increases the transportation cost to get the food to the grocery stores. We have $6 corn because of inflation--not because of corn based ethanol. We are exporting 2.5 bil bu of corn. We currently have ending stocks of 1.283 bil bu. There is NO supply shortage increasing the price of corn due to corn based ethanol. If you eliminated ethanol overnight, those acres simply would not be planted. I suppose US corn based ethanol is responsible for $945 gold and the rice shortage is SE Asia too. lol. Best.


48, take away 30% of current corn demand, (ethanol) and I think you would see much lower prices. Unfortunately, us farmers can not afford to see much less than $5 corn now with the increased input costs.
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Merkel, Like Lula, Rejects Biofuels as Root of Food-Price Rises
By Jeremy van Loon
April 17 (Bloomberg) -- German Chancellor Angela Merkel said soaring prices for rice, milk and other staple foods are not related to global demand for biofuels, and can instead be ascribed to growing affluence in developing countries.
``Millions of people are becoming wealthy, and when 100 million Chinese start drinking milk then that's going to have an impact on food prices,'' Merkel said today in Freiberg, eastern Germany, during a visit to a biofuel plant run by Choren Industries GmbH. ``Those rising global food prices have nothing to do biofuels.''
Merkel's view contrasts with that of Prime Minister Gordon Brown, who last week wrote to leaders of the Group of Eight nations to say the U.K. government is concerned biofuels made from foods such as sugar cane and corn are stimulating inflation and pushing up food prices around the world. President Luiz Inacio Lula da Silva of Brazil, the world's top sugar cane grower, has repeatedly rejected criticism of biofuel production.
``Food is expensive because the world wasn't prepared to see millions of Chinese people, millions of Indians and Africans eating three times a day,'' Lula told reporters in Brasilia yesterday.
Merkel is scheduled to visit Brazil during a week-long trip to Latin America next month.
The price of rice, the staple food for half the world, has doubled in the past year to an all-time high. Global food prices increased 57 percent last month from a year earlier, according to the United Nations Food and Agriculture Organization. Countries such as Indonesia and Egypt have seen unrest over high prices.
Crops vs Biofuels
Demand for biofuels, along with increased competition for cropland between food and fuel uses, is taking up much of the increase in global crop production, according to a World Bank report released April 9. Food production is failing to keep up with demand, the bank said.
Merkel's government aims for 20 percent of car fuel sold in Germany to comprise biofuels by 2020. To meet that goal, Germany will increase its use of two different forms of biofuel, pure ethanol and biodiesel. The European Union wants to power 10 percent of transportation in the region with biofuels by 2020.
The chancellor was joined in Freiberg by Daimler AG Chief Executive Dieter Zetsche and Volkswagen AG Chief Executive Officer Martin Winterkorn to discuss the opportunities for synthetic biofuels.
Synthetic, or second-generation, biofuel is made from plant waste, wood trimmings and straw, unlike ethanol which is distilled from corn or sugar cane and competes with the production of food stuffs for agricultural land.
To contact the reporter on this story: Jeremy van Loon in Freiberg at [email]jvanloon@bloomberg.net[/email].
Last Updated: April 17, 2008 08:24 EDT
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Biggest grain exporters halt foreign sales
By Javier Blas in London, Isabel Gorst in Moscow and Lindsay Whipp in Tokyo
Published: April 15 2008 19:04 | Last updated: April 16 2008 02:37
The global food crisis intensified on Tuesday as Kazakhstan, one of the world?s biggest wheat exporters halted foreign sales and rice prices shot to a record high after Indonesia stopped its farmers from selling the grain abroad.
In another sign of turmoil, a big food company in Japan, Nihon Shokuhin Kako, said high corn prices had forced it to buy cheaper genetically modified corn for the first time, breaking a social, though not legal, taboo and signalling that opposition to GM foods could weaken in the face of record food prices.
Meanwhile, fresh wheat export curbs in Kazakhstan, the world?s fifth largest exporter, and the rice bans in Indonesia, threaten to trigger bans in other food exporting countries, which will now face much higher demand from importing countries.
Hussein Allidina, at Morgan Stanley in New York, said pressure for export bans was likely to increase elsewhere as developing countries suffering high inflation tried to combat rising local prices by cutting back on exports of agriculture commodities.
Indonesia ? which joins Vietnam, Egypt, China, Cambodia and India in banning foreign sales ? was expected to export the grain this year due to a bumper crop. Corn futures prices in Chicago last week hit a record $6.16 a bushel, up 30 per cent in the past three months.
Indonesia?s export ban boosted the price of rice futures in Chicago to a all-time high of $22.17 per 100 pounds, up 63 per cent since January. Wheat prices moved higher to $9.11 a bushel and traders warned prices could rise further as the Kazakhstan ban together with restrictions in Russia, Ukraine and Argentina have closed a third of the global wheat market.
Additional reporting by John Aglionby in Jakarta
Copyright The Financial Times Limited 2008
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Read where Japan is opening it's imports to CHEAPER Genetically Modified corn. There is no shortage of corn. And, US corn based ethanol is certainly not the reason for the shortage of wheat and rice. Both articles correctly identify the cause: INFLATION.
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Many Roots to Food Aid Crisis
Government Meddling and Under Investment in Yields Contribute More Damage than Ethanol
Marcia Zarley Taylor DTN Executive Editor
Bio | Email
Wed Apr 16, 2008 02:05 PM CDT
KANSAS CITY, Mo. (DTN) -- High commodity prices are escalating concerns about world hunger. But the core reasons for global food price inflation have been decades in the making and can't be blamed solely on the advent of biofuels, speakers at an international food aid conference here said this week.
"Someone needs to set the record straight," Patrick Packnett, assistant deputy administrator of global analysis for USDA's Foreign Agricultural Service, told DTN. "People are looking for an easy target when they blame ethanol for raising food prices, but there are many other factors at play, and ethanol isn't even the major issue."
In remarks to more than 700 attendees here for a three-day conference sponsored by USDA and the Department of State, speakers acknowledged that higher commodity prices are straining budgets of humanitarian efforts to feed the world's hungry, many of whom survive on less than $2 a day. Season-average 2007-08 prices for wheat, rice, corn, soybeans and soyoil are running 63 percent to 101 percent above their previous five-year averages, Packnett noted. But he stressed the main factors igniting prices have more to do with Asia's rapidly growing middle class; crop failures in other parts of the world; a cheap U.S. dollar that puts exports on full throttle; misguided overseas policies like embargoes or export taxes; and under investments in technologies that could have significantly increased world yields.
Since 2002, global incomes and demand for food in Asia and other developing countries grew faster than at any time in the last three decades, Packnett said. For the past two years, the world consumed more wheat than it produced, drawing down world buffer stocks to serious levels. Traditional grain exporters such as Argentina and Ukraine worsened the shortages by imposing embargoes or export taxes to block shipments outside of their countries, he added. That caused wheat prices to rocket and encouraged hoarding.
"It's also a huge disincentive for growers to produce," he said. "No wonder there are farmer demonstrations and strikes in Argentina. The policy tells their producers that they can't benefit from higher prices."
With traditional grain exporters missing in action, Americans had to backfill orders for both food-grade wheat and feed grains this year. The U.S. grain industry will likely ship 32 percent more wheat than a year earlier. Meanwhile, the European Union, which experienced wheat crop failures in 2007, has purchased 839 percent more corn from major exporters than it did in 2006. Virtually all of that is non-GM corn meant to replace feed-quality wheat to raise livestock. But the EU's increased presence in world markets is expected to push U.S. corn to a record 63.5 million mt this year, as Americans supply Asian customers who normally ordered from Argentina or China.
Price increases in rice, now at its highest since 1980 and 63 percent above it five-year average, are harder to justify, Packnett said. Since much rice is grown on specialized land, ethanol plays virtually no factor in its supply. "If you look at global supply and demand, there's been no huge change that would support that kind of surge in prices," he added. But Vietnam, China, Egypt and dozens of other countries have imposed controls to keep domestic supplies and prices in check.
Ken Eriksen, senior vice president of transportation for Informa Economics, also agreed that "commodity prices alone aren't always the problem in global trade." Ocean freight prices have soared 42 percent over a year ago, in large part because demand for items like steel and coal in Asia has commandeered so many ships. The challenge for humanitarian aid, however, is that many organizations are now spending a third of their budgets just moving in-kind donations across the world. The U.S. government's Food for Peace program, however, must budget far more than that, he added, since it is required to hire a limited number of U.S. flag vessels with much higher labor costs.
Cris Muyunda, a senior agricultural adviser for the Common Market for Eastern and Southern Africa -- a trade block representing 19 countries and half of Africa's 800 million population -- identified other problems that heighten food insecurity. "Even when we have food surpluses, we have distribution problems," Muyunda said. In his region of Africa, countries pave only 60 kilometers of road for every million people; in Brazil that's over 1,000 kilometers; in the developed world, the ratio is over 20,000. For some landlocked African countries, lack of decent roads means 55 percent of the cost of providing food aid is due to transportation, Muyunda said.
Despite that handicap, the real challenge in Africa is low cereal yields, he added. Grain yields in eastern and southern Africa have hovered at about one ton per hectare since 1962, the lowest in the world, Muyunda noted. Meanwhile, crops like U.S. corn, which has benefited from proper fertilization, chemicals and seed advances, have made huge strides in the last 50 years.
Given the extreme nervousness about food supplies for both rich and poor in 2008, however, there is no margin for error this season. On Monday, the White House announced USDA would release $200 million in extra emergency food aid from the Emmerson Humanitarian Trust for overseas use. Plus, USDA is counting on a crop rebound for wheat, corn and soybean acres here in the U.S. in 2008. "We're running such tight supplies on everything that any major production problem on any major crop, anywhere in the world, leaves us without a buffer," Packnett said. "If that happens, all bets are off. We're in uncharted territory."
Marcia Zarley Taylor can be reached at [email]Marcia.taylor@dtn.com[/email]
(CZ)
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From the above DTN article:
"People are looking for an easy target when they blame ethanol for raising food prices, but there are many other factors at play, and ethanol isn't even the major issue."
Patrick Packnett
Asst. Deputy Administrator of Global Analysis
USDA Foreign Agricultural Service
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Something interesting is The World Clock...when you take the ever increasing human population into consideration....and other factors, well...there will be ever increasing demand. JMHO
http://www.chippynews.com/worldclock.htm
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I posted while in Europe the price of petrol. I was near the Eiffel Tower and the price at the Esso station was $1.42/liter which would equate to $8.58/gal. I think the price of gasoline has little to do with the the supply of grain. I visited four countries and a couple of British West Indies islands earlier in the year. We have it the best and most efficient system of production and distribution. Yet we are the ones who are criticized. Europe is more productive than anyone after us and yet they do not have the distribution of wealth as enjoyed in this country. It is the well intentioned UN which has suggested and mandated many of these clean air standards and now they are creating havoc in the food chain. You should watch their version of CNBC as more global context in scope. They cannot stand this strong Euro and weak $. Inflation is 2-3% above expectations. Iceland raised their interest rate to 15.5%. They had several bank failures in Germany and Spain.
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