Agriculture Department chief economist says ethanol has “important impact” corn prices, little impact on wheat, rice
In Washington, the chief economist at the Department of Agriculture said that ethanol subsidies have had an “important impact” on corn prices, saying that retail food prices increased by 4 percent in 2007 and will increase by 4 to 23.,5 percent in 2008. Joseph Glauber added that ethanol had little to do with increasing wheat and rice prices, attributing those rises to Chinese demand, and Australian and Canadian crop failures.
The US Labor Department reported that food prices rose at an annual 4.4. percent rate in March, but gasoline and other energy costs have rises 17 percent in the past year.
Researchers from Texas A&M University have concluded that eliminating the Renewable Fuel Standard “does not result in significantly lower corn prices,” and that “The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil.”
The report said that, in addition, speculative investment in the commodities futures markets were leading to price volatility, and “the loss of the ability to use futures markets for price risk management due to the inability to finance margin requirements.” Commenting on the report, National Corn Growers Association president Ron Litterer said “The Texas A&M study dispels the food vs. fuel debate. This study shows there are many forces creating increases in food costs and ethanol is not a major factor.â€
