Last year, you may recall, Roll Call exposed the Grocery Manufacturers Association’s plan to use the food vs. fuel debate to cover their industry’s price increases.
Prices are up because the world is consuming more sugar than farmers are producing. One big factor: The world's largest sugar producer, Brazil, is diverting huge amounts of its cane crop to making ethanol fuel. Likewise, the food industry has complained bitterly in recent years about the U.S. ethanol industry's ravenous appetite for corn, which helped push up prices for that key ingredient too.”
Sugarcaneblog provides the real explanation for current, temporary sugar price increases – rain has slowed the pace of harvesting – even while Brazil's sugar production is up 15 percent this year.
Reuters reporter Brad Dorfman provides much more thorough, clearer analysis on the claims made by the grocery manufacturers:
Food industry analysts say inflation should be contained for an industry that sharply increased prices in the past year as costs for commodities such as vegetable oil, wheat and corn surged.
“Many commodity prices have retreated, and manufacturers are trying to defend the price increases as consumers and retailers try to rein in costs in a weak economy.”
The Consumer Price Index shows that food prices have actually declined a percentage point over the first half of this year, after rapid increases in the past two years. The data also show that the increases in the past year were out of proportion to inflation in other categories.
CPI Percent increase/decrease
Source: Bureau of Labor Statistics.
Neither biofuels nor energy provide a good explanation for increases in food prices.
[caption id="attachment_410" align="alignnone" width="468" caption="Increases in food price inflation do not correlate well to either biofuel production or energy price data."][/caption]
Even a Congressional Budget Office study requested by Members of Congress who wanted to make a case that biofuels’ were raising the cost of government food programs could only find a 10 percent to 15 percent impact on food prices from biofuels. That study showed that nearly two-thirds of the price increases could not be explained by either biofuels or energy prices.
Of the 5.1 percent CPI increase for food between April 2007 and April 2008, energy had a larger effect than biofuels. But even together, they account for a fraction of food price inflation:
0.5 to 0.8
10 to 16%
3.2 to 3.5
62 to 68%
Source: Congressional Budget Office, “The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions,” April 2009
So why is GMA resurrecting its campaign to blame biofuels for food price increases? (See also their letter to Sen. Boxer from a few weeks ago.) Likely because it was a very profitable strategy for them last year and it continues to work, at least with half the time.
Source: 2020 Project, FoodPriceTruth.org.