A Reality Check on Ethanol and Food Prices

March 5, 2013

Ethanol producers are cherry-picking data to hide how the Renewable Fuel Standard is raising your family’s grocery bill. Here’s what they’re not telling you:

  1. Increasing food prices are a continuing trend. Ethanol proponents argue food prices rose just 1.8% in 2012, the second-lowest annual rate in the last 20 years. First, consider that this number represents a 1.8% increase over 2011, which saw its own increase of 4.7%. That’s the third-highest increase in food prices we’ve seen since 1993. In fact, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics, the 2012 increase represents the fifth-lowest increase over the past 20 years, not the second-lowest.
  2. There is a clear link between the RFS and rising food costs. The three largest December-to-December increases in Food CPI over the last 20 years have all taken place since the RFS first went into effect in 2005:
    • 2008 = +5.9%
    • 2007 = +5.0%
    • 2011 = +4.7%
  3. It’s more expensive than ever to produce food. The trend is clear: grocery prices are rising, but even these increases don’t reflect the rising cost of food production. Food producers are operating in a competitive market, so they’re forced to compress margins to keep customers. In 2012, the Producer Price Index for finished consumer food, which shows how much it costs producers to actually make food, was 2.3%. That’s the eighth-largest increase in the last 20 years. Again, we need to consider this in the context of 2011, which saw the third-highest price increase for food production over the past 20 years at 6.0%.

The amount of corn required to produce the ethanol in one gallon of gas could feed a person for an entire day. Linking the ethanol mandate to rising food prices isn’t alarmist rhetoric; it’s an accurate analysis of the facts. The ethanol industry wants you to believe that using 40% of America’s corn for fuel instead of food doesn’t raise food prices. Here are just a few organizations who vigorously disagree with that assertion:

That’s right. Dozens of organizations representing the people responsible for producing America’s food are standing against the RFS. Will you join them? Demand change. Sign our pledge to demand a smarter solution, a Smarter Fuel Future.