Demand for ethanol may hike food prices

by 5m Editor
26 February 2007, at 9:38am

IOWA - Soaring demand for ethanol will likely mean higher prices at grocery stores for products from soft drinks to broiler chickens, but the increases may be too small for most consumers to notice.

In the past six months, the rush to produce more corn-based ethanol has doubled the grain's value, increasing costs for foods that include corn as an ingredient or rely on it as animal feed.

The value of other crops — soybeans, cotton, wheat, rice and vegetable crops — also will likely climb as farmers switch to corn and cash in on prices as high as $4.08 a bushel. Last year at this time, prices hovered around $2.22.

"We've seen a little of the retail food price impact already," said Robert Wisner, an agricultural economist at Iowa State University.

Wisner predicted consumer prices would slowly rise over the next few years as the ethanol industry more than doubles its capacity.

Products facing price increases include soft drinks and processed foods such as ketchup made with high-fructose corn syrup, corn-based foods including corn chips and breakfast cereals, and soybean oil and wheat flour. Meat and dairy items could see some of the largest increases because producers are being forced to pay much more for feed made with corn, Wisner said.


5m Editor