New Economy Citizen Media

Sky High Grocery Prices

Wednesday April 2, 2008

Massive Increases Predicted for Food Prices

A drop in corn production combined with federal mandates backing ethanol production will result in "massive increases" in food prices, said Scott Faber, vice president for the Grocery Manufacturers Association. Posted at CNBC on April 1, 2008. Corn Cuts to Hit Home at the Supermarket

Corn is one of the primary feed items for livestock as well as an ingredient in a number of food products. The first items to experience increases will be eggs and dairy products. These are the most sensitive to increased feed costs. Next to feel the pinch will be poultry and pork. Beef will be take longer to be affected by the increase in feed prices.

The problem this year has several components. First is the flooding in the Midwest and Great Plains states. The fields are to wet and in some cases under water. By the time they are able to be worked, it may be too late for corn to mature to harvest. Ethanol producers receive corn at government subsidized prices, this is not the case for food producers. They are paying the market price and it is getting passed on to consumers.

Ethanol is a Boondoggle

When it comes to reducing carbon emissions, Ethanol is a band-aid on a bullet wound. It takes massive amounts of energy for very little reduction in overall carbon emissions. So you might ask who is benefitting from Ethanol? The answer is that the people who build and operate the expensive facilities that produce ethanol. This is another form of corporate welfare that benefits the few at the expense of the many. Those building ethanol plants benefit from this hand out. The US auto makers are another group that stands to profit. They are mandated by law to produce a specific percentage of vehicles that meet emissions standards by certain dates. Since they continue to build large non fuel efficient vehicles, and market forces are rendering their products extinct, this is a work around for poor planning and products coming from US auto makers.

More on Ethanol

• Quick Hits: Ethanol Myth Persists by Andrew Jeffery
• Minyan Mailbag: Trends in Inflation and Deflation by Mish Shedlock