Biofuel Mandate Fueling Disaster

US - Anyone who has been to a supermarket lately knows that food prices are going up. In fact, food prices are now rising at twice the rate of inflation, reportedly the fastest increase in nearly two decades.
calendar icon 2 September 2008
clock icon 3 minute read

Factors behind this price spike include higher energy costs, the weak dollar, growing global demand and biofuel mandates. Of all these factors, the only one within our control is the ill-conceived federal mandate that diverts more corn to ethanol production.

RedOrbit reports that recent policy changes approved by the US federal government have resulted in about one-third of this year's U.S. corn crop being converted into ethanol. As a direct result of these policies, corn prices have more than doubled in the past two years and are now at record levels.

The impact of this price spike goes way beyond the price of corn- based products. As the price of corn increases, farmers have no incentive to plant other crops, which increases the price of other grains because of reduced supply.

Moreover, because corn is the primary ingredient in animal feed, the increase in feed costs has driven up the price of meat, poultry, dairy products and eggs. It is easy to understand how current ethanol policies have resulted in significantly higher grocery bills when cereals, snacks, sweeteners and other products derived from corn are factored.

According to the USDA data that tracked food prices over the last three years, egg prices have gone up 69 percent, milk is up 23 percent, chicken has increased 12 percent and bread has risen 35 percent. These figures do not even take into account the recent flooding in the Midwest, which has driven corn prices to new highs.

Such rapid price spikes are a burden to economy and citizens. Food expenses account for up to one-third of family budgets. When food prices increase at this rate, it affects one's ability to invest in savings, education and overall quality of life.

Restaurants and food service businesses have been particularly challenged by escalating food costs. As a result of the slowing economy, people are either eating out less often or choosing more affordable dining options.

RedOrbit says that the government needs to be talked into changing the course on food-based biofuel mandates before it is too late.

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