NCPA - National Center for Policy Analysis

Ethanol Policies Leading to Higher Food Prices

March 31, 2011

Whether shopping at big-box stores in the United States or haggling with vendors at marketplaces in rural Africa, consumers around the world are confronting noticeably higher prices for the food they need.  Agricultural and economics experts report government policies encouraging or mandating ethanol production are largely to blame, says Bonner R. Cohen, a senior fellow at the National Center for Public Policy Research.

  • Food prices globally have risen 29 percent during the past year, according to the World Bank Group, pushing tens of millions of people into poverty.
  • Staple food crops show an even steeper rise, according to United Nations figures, with corn prices rising 53 percent and wheat prices rising 47 percent during 2010.

Agricultural experts are increasingly identifying government policies aimed at promoting biofuels -- corn-based ethanol in the United States, sugar-based ethanol in Brazil and biodiesel in Europe -- as a factor in the sharp rise of the cost of grains and meat around the world.

Figures from the U.S. Department of Agriculture underscore how the diversion of farmland from food to fuels has changed land-use patterns in the Midwest's corn belt.

  • In 2001 only 7 percent of U.S. corn went to ethanol, or about 707 million bushels.
  • By 2010, ethanol's share was 39.4 percent, or nearly 5 billion bushels out of total U.S. production of 12.45 billion bushels.

Because the United States provides more than half of global corn exports, the diversion from food to fuel inevitably makes its presence felt on global markets, says Cohen.

Source: Bonner R. Cohen, "Rising Food Prices Spark Renewed Criticism of Ethanol Mandates," Heartland Institute, March 14, 2011.

 

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