The Sky is Not Falling

Food companies that rely on cheap corn are running around like chickens with their heads cut off and crying foul again with so-called “studies” submitted to the EPA that “prove” food prices will increase if the blend rate for ethanol in gasoline is increased to 15 percent.

But wait just a minute. The latest Consumer Price Index shows consumers are paying less for groceries today than they were just six months ago. The May index for meats, poultry, fish, and eggs was down almost a full percentage point from April and eggs index declined 6.5 percent. The index for dairy and related products fell 0.5 percent in May and has declined 5.6 percent over the past year.

What’s up here, Chicken Little? Because, despite the fact that a number of ethanol plants have closed over the past year, ethanol production is still increasing. The most recent figures from the Energy Information Administration (EIA) were for March and they showed that American ethanol facilities produced 640,000 barrels per day in March 2009 – up 79,000 barrels, or 12 percent from a year ago! Assuming that continues, the ethanol industry will once again produce a record amount of ethanol and distillers grains in 2009.

Point being, at the same time ethanol production is increasing, food prices are heading back downward (finally!). In other words – no correlation. The sky is not falling.