Not the Gummy Bears! And Beer too?

In Food vs Fuel, General by Cindy

Gummy BearsThe latest food industries to blame ethanol for rising prices are German beer brewers and gummy bear makers, according to this article from Spiegel International.

Iowa State University’s Center for Agriculture and Rural Development (CARD) asks the question, Do Biofuels Mean Inexpensive Food Is a Thing of the Past?

To answer that, CARD says knowing how U.S. consumers spend their food dollars and how higher commodity prices influence food prices will give us a better understanding of whether we’ll be spending more or less on food in the future.

One indicator of a nation’s standard of living is the proportion of income that its citizens spend on food. Typically, this share is measured using after-tax or disposable income. This share in the United States has fallen from 20 percent in the early 1950s to about 10 percent today. In contrast, Canadians today spend an average of about 14 percent of their disposable income on food, and Mexicans spend 26 percent. It would be even less than 10 percent if we didn’t spend about HALF of our food dollar dining out, and the main reason food prices have risen more slowly than other prices over the years is “rapid productivity growth on the farm and all along the food chain.”

CARDOkay, so what happens when the price of corn goes up? According to CARD, as an example, “if a $1.00 can of soda contains 2¢ worth of corn that is contained in high-fructose corn sweetener, then a doubling in the price of corn would increase the cost of producing the soda by at most 2¢.” But, corn makes up a smaller share of the final price for all foods consumed AWAY from home than food consumed at home because of additional labor costs.

In a recent study, CARD researchers estimated that a 30 percent increase in the price of corn, and associated increases in the prices of wheat and soybeans, would increase egg prices by 8.1 percent, poultry prices by 5.1 percent, pork prices by 4.5 percent, beef prices by 4.1 percent, and milk prices by 2.7 percent. For all food consumed at home, average prices would increase by 1.3 percent. For food consumed away from home, average prices were estimated to increase by 0.9 percent. So, across all food consumed, 30 percent higher corn prices increase all average food prices by 1.1 percent, according to our estimates.

Ethanol may be a convenient scapegoat for food companies and others to blame for higher prices, but there are too many other factors that may be having a much larger impact. CARD uses milk as an example, saying that “the primary cause of high milk prices is that international demand for dairy products has outstripped international supply.”

Not sure if that is the case with beer and gummy bears, but ethanol does give those folks a good reason to increase their prices and lay the blame elsewhere while they make more money.