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Burger chains claim biofuel law raises food prices, and want it repealed

Big American fast-food chains have entered the fight against an alternative fuel policy that critics say is pushing up the price of food worldwide.

In a new lobbying effort, they are calling on Congress to repeal a law that requires gasoline to contain ethanol, a fuel produced mainly from corn.

Corn competition

When you drive up to Wendy’s or other fast-food chains in the U.S., you are consuming corn in at least two ways.

The chicken or hamburger in your meal comes from an animal raised on corn.

Since the fuel in your car is 10 percent ethanol, which is made from corn, the animal and the automobile are competing for the same grain.

“Ethanol diverts a significant share of the US corn crop each year,” says University of Missouri economist Pat Westhoff. “And, by doing so, it makes corn prices higher than they otherwise would be.”

Higher corn prices mean higher meat prices.

Ethanol has consumed a growing share of the corn market since a 2005 law required it be added to U.S. gasoline.

Now, the chain restaurant industry wants the law repealed.

At a recent news conference, franchise owner Ed Anderson said that the mandate costs each of his four Wendy’s restaurants up to $30,000 per year.

“Congress passed the ethanol mandate, and now restaurants are being hit at a time our economy can’t afford it,” he said.

Questionable impact

But not everyone agrees the law is driving up food prices.

They note that even in this year’s record-breaking drought, when corn prices hit new highs, the federal government declined to waive the law. Studies by the U.S. Environmental Protection Agency (EPA) found doing so would only change the price of corn by a few cents.

“It moves three or four cents on a sneeze on the floor of the Chicago Board of Trade,” says Renewable Fuels Association chief Bob Dinneen. “So waiving this program wasn’t going to provide any relief. Ethanol was not driving the price increase. There was no reason to waive the program.”

Dinneen says ethanol is reducing dependence on foreign oil and holding down the price of gasoline.

Little difference?

Ethanol is typically cheaper than petroleum. Fuel makers now add it to gasoline regardless of the law. So waiving the mandate might not not matter much in the short term.

“We don’t think there would be a large impact on the prices of ethanol and the prices of corn and the amount of corn that’s being used for ethanol production in the very short term,” says Westhoff. “If those policies were to change forever and ever, then there might be larger changes in front of us.”

Current policy calls for increased use of ethanol. Westhoff says that will require even more corn and put more pressure on food prices.

That is, unless other biofuels take the place of corn ethanol. The Renewable Fuels Association’s Dinneen says fuels not made from food crops are coming — thanks to corn ethanol.

“The grain ethanol industry has built the markets, it’s established the technology, it’s created the policies that are allowing those other industries to come into commercial scale,” he says. “We are the foundation on which those new fuels will materialize.”

But until those fuels do materialize, the tension between burgers and biofuels will continue.

 
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