WASHINGTON, D.C. --- The nation's food industry is lobbying legislators to study the impact that President Bush's proposal for expanded ethanol production will have on the food supply. Ramping up ethanol production is a major part of the President's plan to cut gasoline usage 20 percent in 10 years.
Food industry lobbyists are citing a new study, conducted by researchers at Iowa State University, that highlights the potential for large spikes in the cost of retail meat, eggs and other dairy products. The study was commissioned by several associations representing producers of beef, poultry and pork, the National Grain and Feed Association and Grocery Manufacturers/Food Products Association -- all of which use corn.
If higher-than-expected oil prices trigger greater demand for flex-fuel vehicles, ethanol production could reach more than 30 billion gallons per year by 2011, the study said. Today, U.S. capacity is only 4.8 billion. That demand would increase corn acreage to more than 110 million acres and drive the price of corn to more than $4.40 a bushel. This increase in corn production would mean less acreage for soybeans and wheat, which would trigger price increases in these crops.
In such a scenario, the study said, beef, pork and poultry prices would rise by more than 4 percent, while egg prices would rise by about 8 percent.
"The Grocery Manufacturers Association supports the goal of reducing our nation's reliance on fossil fuels and applauds Congress and the Bush Administration for their efforts to increase the use of alternative forms of energy, including an increase in the use of biofuels," the association said in a statement. "However, America's biofuels policy should be pursued thoughtfully and deliberately, taking into full account the possible unintended consequences of a sharp increase in the use of corn for fuel."
Originally posted on Fleet Financials