Biofuels have forced food prices up 75%

[andyandy]

This, if correct is a pretty huge story given the massive impact that rising food prices have had across the globe... and given the substantial political capital given to biofuels both in America and in Europe.

Quote:

Biofuels have forced global food prices up by 75% — far more than previously estimated — according to a confidential World Bank report obtained by the Guardian. The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.

Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush. "It would put the World Bank in a political hot-spot with the White House," said one yesterday.

http://www.guardian.co.uk/environmen...enewableenergy

[senorpogo]

Stupid, stupid ethanol.

edit:
Worst part...

Quote:

Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt.

[Jimbo07]

Quote:

according to a confidential World Bank report obtained by the Guardian. The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

I wonder if we'll ever get to see the actual report, or are people going to be talking about the cover-up years down the road?

Quote:

"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

How can this possibly be correct? Has anybody's grocery basket in the Western world gone up 140%? Higher energy prices have only accounted for 15%, but a barrel of oil is up almost 100% over that period?

Something stinks here...

ETA:

Is that this Don Mitchell?

Food Prices 30 Jun 2008

The article either lied or experienced some typos. From the page I just linked

Quote:

The root causes of the phenomenon of rising food price—high energy and fertilizer prices, the demand for food crops in biofuel production, and low food stocks—are likely to prevail in the medium term.

Energy and fertilizer prices are projected to stay high. Already, fertilizer prices have increased 150 percent in the past five years. This is very significant, because the cost of fertilizer is 25 to 30 percent of the overall cost of grain production in the U.S. (which supplies 40 percent of world grain exports).

and

Quote:

The biofuels surge makes things worse by adding high demand on top of already high prices and low stocks,’ said Mitchell

I have no doubt that biofuels could be a small piece of the puzzle making this perfect storm, but talk about $150 oil, before bothering to make statements like, "Stupid, stupid ethanol."

[andyandy]

Quote:

How can this possibly be correct? Has anybody's grocery basket in the Western world gone up 140%? Higher energy prices have only accounted for 15%, but a barrel of oil is up almost 100% over that period?

From the article, they are talking about global prices and not limiting themselves to western prices.....

countries such as Egypt have seen very substantial price rises
http://news.bbc.co.uk/1/hi/world/mid...st/7288196.stm

And there definitely won't be a 1-1 correspondence between oil price rises and food prices..

Quote:

The article either lied or experienced some typos.

From the article, they reached a much more damning conclusion about biofuels than previous studies

[senorpogo]

Originally Posted by Jimbo07

"Stupid, stupid ethanol."

Are you suggesting that ethanol isn't stupid?

[Jimbo07]

Through that page, there was an interesting link

Food Prices Figures

The first graph is interesting. It seems like food hit a low between 1995 and 2005.

Also, corn (used for ethanol in the U.S.) seems to have risen the least in figure 3. Check out the rise in energy in figure 4. Check out the last figure. biofuel use of vegetable oils is going to rise from 4 to about 14 % of use. One way or the other, it doesn't look like biofuels are accountable for about 75% of the rise in food prices.

With fertilizer increasing 150% from the article I linked to (quoting Mitchell), it doesn't appear to be having only a 15% effect according to your article (apparently quoting Mitchell, although the report is "unpublished")

We don't have the final word yet, buy I'm tempted to call Shenanigans...

ETA:

Quote:

Are you suggesting that ethanol isn't stupid?

For my answer to this check out any one of our ethanol slugfest threads. I want to be more expansive here and talk about biofuels. In Canada, Canola is often cited in case studies regarding bio diesel. Biofuels aren't stupid... they're just not brilliant, which is a shame. Biofuels won't be our energy magic bullet. Unfortunately, it's made out to be by governments that don't want to do any real work...

[jj]

Around here, food hasn't risen by 75%, although I expect it to do so, for the obvious reason that the price of everything in the world is tied, with, of course, a time-lag, to the price of the fuel it takes to make it.

And everything takes energy to make.

[senorpogo]

Originally Posted by Jimbo07

For my answer to this check out any one of our ethanol slugfest threads. I want to be more expansive here and talk about biofuels. In Canada, Canola is often cited in case studies regarding bio diesel. Biofuels aren't stupid... they're just not brilliant, which is a shame. Biofuels won't be our energy magic bullet. Unfortunately, it's made out to be by governments that don't want to do any real work...

I should have been clearer. Biofuels, I like. I find that ethanol from corn is stupid.

[Jimbo07]

Originally Posted by senorpogo

I should have been clearer. Biofuels, I like. I find that ethanol from corn is stupid.

How about this... ethanol from wheat is least wise. From there you can increase through varieties of corn, switchgrass, sugar and even waste biomass! The devil is really in the details, especially on a plant-by-plant basis.

[senorpogo]

I'm sticking with "stupid".

[Soapy Sam]

Originally Posted by Jimbo07

I
How can this possibly be correct? Has anybody's grocery basket in the Western world gone up 140%? Higher energy prices have only accounted for 15%, but a barrel of oil is up almost 100% over that period?

Something stinks here...

The price of many basic foods has roughly doubled in my experience in the last year in the UK. How much this is due to biofuel, and how much to reduced planting of cereals, increased transport (oil) cost and changed supermarket pricing policy is anyone's guess.
(The glaring exception, ironically, being alcohol - which has fallen in real terms). Food is a relatively small fraction of my budget, but in countries where 70-80% of earned income goes to just feed people, this is an economic disaster.

[Jimbo07]

Originally Posted by Soapy Sam

The price of many basic foods has roughly doubled in my experience in the last year in the UK.

Some products have gone up, such as wheat flour. However, things like milk have increased 10-20%, not 100% or even 140%! I'd like to see this 'report' because that idea of 'grocery basket' price comparisons is pretty common. It's conducted by consumer advocacy groups and things. Moreover, the increase in prices for wheat and corn seem to be below that of rice, where some of the biggest concerns exist!

Quote:

How much this is due to biofuel, and how much to reduced planting of cereals, increased transport (oil) cost and changed supermarket pricing policy is anyone's guess.

Well, that is the issue. How much is each factor contributing to the problem? Ethanol opponents have beeen screaming about this for some time. It gets under my skin. You don't see as many protests over biodiesel, yet I had an economics prof claim that to supply only 5% of our country's diesel needs, we'd have to convert all of our arable land to canola! I dispute this, personally, but who am I?

From the physical numbers alone, "11 percent of the global crop" of corn went into biofuels. How does that impact the price of rice? Even if I were pessimistic about biofuels, it seems physically impossible that biofuel demand could account for a 75% increase in global food prices! It is a claim which is not supported by the article I linked to, involving (I think) the same Don Mitchell.

[ARubberChickenWithAPulley]

Originally Posted by Soapy Sam

How much this is due to biofuel, and how much to reduced planting of cereals, increased transport (oil) cost and changed supermarket pricing policy is anyone's guess.

I agree, although ethanol production would contribute to the reduced planting of cereals, which would drive up food prices even more. I'd like to see some statistics on how many soy, rice, wheat, etc. fields have been converted to corn in order to make ethanol.

[Puppycow]

[Childlike Empress]

75%? Maybe the World Bank ignored some important other factors? Like, f.e., speculation?

Quote:

World market prices for agricultural commodities have surged precisely as big investors have pulled out of traditional investment and credit markets, largely as a result of the bursting of the US housing and credit bubbles in 2007. Speculative capital has gone in search of other profitable investments.

A major avenue for such speculative capital is commodity futures. This essentially involves financial bets that prices of basic goods such as oil, grains and metals will continue to rise. Since these futures are used as benchmarks for actual trading in the physical commodities, their heady rise has helped sharply pull up market prices for the commodities themselves.

Recent congressional testimony by a US hedge fund manager, Michael Masters, sheds an interesting light on commodity futures speculation. He told Congress:

“In the early part of this decade, some institutional investors who suffered as a result of the severe equity bear market of 2000-2002 began to look to the commodity futures market as a potential new ‘asset class’ suitable for institutional investment. While the commodities markets have always had some speculators, never before had major investment institutions seriously considered the commodities futures markets as viable for larger-scale investment programs. Commodities looked attractive because they have historically been ‘uncorrelated,’ meaning they trade inversely to fixed income and equity portfolios [i.e., they do not necessarily fall, and instead tend to rise, when the bond or stock markets decline].”

Masters continued: “Mainline financial industry consultants, who advised large institutions on portfolio allocations, suggested for the first time that investors could ‘buy and hold’ commodities futures, just like investors previously had done with stocks and bonds.” [...]

To prevent mass speculation in futures from driving prices, the US Commodity Futures Trading Commission (CFTC) places limits on the amount of futures contracts an individual speculator can hold. However, according to 2007 congressional testimony by CFTC Director of Market Oversight Don Heitman, the CFTC has been making an exception to these regulations for Wall Street banks since at least the early 1990s. Now, hedge funds, pension funds or other major investors simply enter into swap agreements with these Wall Street banks to evade CFTC restrictions.

This speculation has taken on grotesque forms. According to the Chicago Board of Trade, less than 10 percent of their grain futures contracts are held by parties actually intending to trade grain. Big investors routinely seek to profit simply from buying futures contracts and, shortly before the due date of the contracts, exchanging or “rolling” them for futures contracts expiring later. This type of speculation is built on the premise that prices will rise, and gives big investors a powerful financial interest in higher commodity prices. [...]

Bloomberg News wrote on April 28: “Commodity index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures.... Investments in grain and livestock futures have more than doubled to about $65 billion from $25 billion in November, according to consultant AgResource Co. in Chicago. The buying of crop futures alone is about half the combined value of the corn, soybeans and wheat grown in the US, the world’s largest exporter of all three commodities. The US Department of Agriculture valued the 2007 harvest at a record $92.5 billion.”

This is from part two of the three part series "The world food crisis and the capitalist market". Interesting read if you dare to visit the "World Socialist Web Site".

[peteweaver]

What would be the impact of biofuel production in south america, given the massive deforestation of the rain forests that has already occured ?

Would more be cleared so that the biofuel industry can boom ? I think yes

[Darth Rotor]

How about a little out of the box thinking, folks?

We have heard in the public wheeze over the past few years much gnashing of teeth and moaning about obesity as a major problem.

Food prices rise. Good news. There is now a financial motivation not to be obese. See also rise in price of cigarettes as a financial motivation to smoke less, or not at all.

*get popcorn*

DR

[drkitten]

Originally Posted by Childlike Empress

75%? Maybe the World Bank ignored some important other factors? Like, f.e., speculation?

What's to ignore? It's certainly possible for speculators to drive prices up on the short term on small-scale thinly traded goods (for example, "cornering the silver market" as a couple of brothers whose names I forget managed to do in the late-70s/early-80s.) "Food prices"? Cornering corn and wheat and rice and rye and pork bellies all at the same time?

Here's a good article (originally cited by Francesa R, <genuflect>) about the role -- or more accurately, non-role -- of speculators in creating the current oil price surge.

"Neither index funds nor other speculators ever buy any physical oil. Instead, they buy futures and options which they settle with a cash payment when they fall due. In essence, these are bets on which way the oil price will move. Since the real currency of such contracts is cash, rather than barrels of crude, there is no limit to the number of bets that can be made. And since no oil is ever held back from the market, these bets do not affect the price of oil any more than bets on a football match affect the result."

"If they had somehow managed to push prices to unjustified heights, then demand would contract, leaving unsold pools of oil."

The same argument applies to foods. I haven't noticed huge unsold piles of corn lying around, nor bargeloads of unsold rice. The simple fact is that even at the current price level, the demand for the physical goods are high enough for the current stockpiles to sell.

[UserGoogol]

Originally Posted by Darth Rotor

Food prices rise. Good news. There is now a financial motivation not to be obese. See also rise in price of cigarettes as a financial motivation to smoke less, or not at all.

Higher food prices is not an entirely bad thing in that Pigouvian sense, but there are issues. One, which is a problem shared with oil, is that higher food prices really hurt lower-income people, since people have to eat (whereas people don't have to smoke). In principle having some sort of relief program whereby people get enough money to assure they can get a basic amount of food but the marginal cost of food remains higher might get the job done, but it's hard to do that on a global level (since there's no world government) so if people want to raise the cost of food to discourage obesity it seems preferable if possible to keep global food prices low-ish and then tax it on a national level and then also provide relief programs on a national level.

Secondly, food is not a commodity, but rather a fairly broad collection of many different kinds of goods, and that has some particularly annoying side effects. Eating more contributes to obesity, but so does what you eat, and there's a fair amount of kinds of foods that are cheap but unhealthy. As such, higher food prices might actually increase health problems if people start eating ramen to save money or something.

[dakotajudo]

Originally Posted by ARubberChickenWithAPulley

I agree, although ethanol production would contribute to the reduced planting of cereals, which would drive up food prices even more. I'd like to see some statistics on how many soy, rice, wheat, etc. fields have been converted to corn in order to make ethanol.

Not that much, actually. Most corn isn't good for wheat, and vice-versa (at least, not with respect to maximal yields). The only real trade is corn for soybeans.

I dunno, there are some farmers here that are considering planting wheat instead of corn (because wheat was very high this winter, largely due to a poor harvest in Argentina, IIRC). But that's not a good idea, it's been getting too hot in July for spring wheat (climate change is a bitch).

Anyway, some data from the USDA NAS (National Agricultural Statistics) service. It's a crude graph, I was in the middle of a historical trend analysis, but got busy with other projects.


Whenever I here this kind of debate, I think of when I was an undergrad, and, to the best of my recollection, gas was about $1 a gallon, hamburger was $1 a pound, milk was $1 a gallon and corn was $2 a bushel.

Given the price of the other things that corn farmers need to buy, what's a fair price for corn?

That is partly what drove ethanol. Corn farmers couldn't continue selling corn at $2 (or less, some years), so they did what any other business does - they found some other use for their product. In the mid-90s, I was on a project funded by the South Dakota Soybean Council, and they were funding bio-diesel research, but they were also funding soy-based waxes and inks.

It's pretty simple - whatever it is, that you produce that people need, when you're willing to accept less pay for that product, then you can expect food prices to go down. Let's be blunt - how many people in the U.S. can say they're even producing anything of inherent value? How many entertainers, internet millionaires, day-traders or overpaid CEOs that expect to live a live of luxury?

Yeah, let's blame ethanol for the problem.

Or Ted Turner. He's taking thousands (if not millions) of pastureland out of production to allow the buffalo to roam free. That's fine for buffalo, but this displaces cattle, which fed corn (corn for feed accounts for about 75% or so of corn production in the U.S., then ethanol, then high-fructose corn syrup; not much is actually harvested for food)

[WildCat]

Originally Posted by dakotajudo

That is partly what drove ethanol. Corn farmers couldn't continue selling corn at $2 (or less, some years), so they did what any other business does - they found some other use for their product. In the mid-90s, I was on a project funded by the South Dakota Soybean Council, and they were funding bio-diesel research, but they were also funding soy-based waxes and inks.

It's pretty simple - whatever it is, that you produce that people need, when you're willing to accept less pay for that product, then you can expect food prices to go down.

Nobody "needs" ethanol from corn. In fact, it's only viable because farm states mandate its use, and the federal government subsidizes it with taxpayer dollars. It produces, at best, only marginally more BTU's than required to manufacture it and at worst it produces far less BTU's than used to manufacture it.

Ethanol from corn is nothing but corporate welfare for farmers and ethanol producers, and does nothing at all to reduce dependency on foreign oil.

If there's a case to be made for the continued use of corn for ethanol production, I haven't heard it.

[Gurdur]

Originally Posted by Darth Rotor

How about a little out of the box thinking, folks?

We have heard in the public wheeze over the past few years much gnashing of teeth and moaning about obesity as a major problem.

Food prices rise. Good news. There is now a financial motivation not to be obese. See also rise in price of cigarettes as a financial motivation to smoke less, or not at all.

*get popcorn*

DR

I'm surprised you didn't make a Modest Proposal to boil down the fat for fuel.

[dakotajudo]

Originally Posted by WildCat

Nobody "needs" ethanol from corn. In fact, it's only viable because farm states mandate its use, and the federal government subsidizes it with taxpayer dollars. It produces, at best, only marginally more BTU's than required to manufacture it and at worst it produces far less BTU's than used to manufacture it.

Ethanol from corn is nothing but corporate welfare for farmers and ethanol producers, and does nothing at all to reduce dependency on foreign oil.

If there's a case to be made for the continued use of corn for ethanol production, I haven't heard it.

You're confusing the issue. It's not that you don't need ethanol from corn, it's that producers have to pay for necessities to plant corn. Those prices have gone up.

It costs about $3/bu to grow corn (http://www.agriview.com/articles/200...ws/crops02.txt). Either cash prices for corn go up, so producers can afford to plant corn, or they don't plant corn, and prices go up due to demand. But prices go up.

In 2003, break-even cost was about $1.50/bu. But biofuel has caused food prices to rise 75%?

If the food value of corn is only $2 a bushel, then it will be sold as non-food product. In the 80s, the push was not just ethanol, but biopolymers (packing peanuts, diapers, etc, see http://www.ptonline.com/articles/200702fa1.html ). If ethanol hadn't got subsidized, the corn would have gone somewhere else. Ethanol started as a response to low corn prices, so to blame it as the primary cause of high corn prices is to miss the larger picture.

So, if you produce something that farmers buy, and you're willing to go back to 1980 prices for that product, we can get rid of ethanol and you can expect corn prices to drop back to 1980 levels.

As for the rest of your comments, there have been enough debate on ethanol per se; it's something I continue to discuss with crop researchers here and I expect to continue to buy ethanol fuel for the near term. I'm paying for energy subsidies, one way or the other, (have you looked at the tax breaks oil companies get, or the cost of protecting trade routes?) - I'd just as soon they go to people I know.

[The Central Scrutinizer]

Originally Posted by senorpogo

Stupid, stupid ethanol.

edit:
Worst part...

Or, to quote Charlie Munger on the subject, "Using food to run cars is monumentally stupid".

[GreyICE]

I'm skeptical about this.

The US uses 1.8 billion bushels of corn for ethanol. That's 50 million tons.

Worldwide grain harvest alone (ignoring all other food substances) was 2.3 BILLION tons.

Somehow I don't buy this 75% nonsense.

[geni]

Originally Posted by GreyICE

I'm skeptical about this.

The US uses 1.8 billion bushels of corn for ethanol. That's 50 million tons.

Worldwide grain harvest alone (ignoring all other food substances) was 2.3 BILLION tons.

Actualy it's trivialy posible to get near infinet price rises out of that by pluging in very low levels of demand elasticity.

Quote:

Somehow I don't buy this 75% nonsense.

Saying that you don't accept the 75% figure is legit. Throwing in an ad-hom at the figure is not.

[GreyICE]

Originally Posted by geni

Actualy it's trivialy posible to get near infinet price rises out of that by pluging in very low levels of demand elasticity.

Um, yeah, problem is that food demand's elasticity is reasonable.

Quote:

Saying that you don't accept the 75% figure is legit. Throwing in an ad-hom at the figure is not.

Unless and until someone explains how 2.5% of the world's grain supply being used for biofuels drives the price of food up 75%, that sort of order of magnitude rise seems... unlikely. There, is that better?

When one considers that good crop years do not suddenly cause the price of food to plunge 75% and bad crop years (which can often impact more than 2.5%) don't cause it to rise 75% now you're treading towards... well... you don't like the 'nonsense' word, so lets go with... fascinating. I would like to know the methodology?

[WildCat]

Originally Posted by dakotajudo

You're confusing the issue. It's not that you don't need ethanol from corn, it's that producers have to pay for necessities to plant corn. Those prices have gone up.

It costs about $3/bu to grow corn (http://www.agriview.com/articles/200...ws/crops02.txt). Either cash prices for corn go up, so producers can afford to plant corn, or they don't plant corn, and prices go up due to demand. But prices go up.

In 2003, break-even cost was about $1.50/bu. But biofuel has caused food prices to rise 75%?

If the food value of corn is only $2 a bushel, then it will be sold as non-food product. In the 80s, the push was not just ethanol, but biopolymers (packing peanuts, diapers, etc, see http://www.ptonline.com/articles/200702fa1.html ). If ethanol hadn't got subsidized, the corn would have gone somewhere else. Ethanol started as a response to low corn prices, so to blame it as the primary cause of high corn prices is to miss the larger picture.

So, if you produce something that farmers buy, and you're willing to go back to 1980 prices for that product, we can get rid of ethanol and you can expect corn prices to drop back to 1980 levels.

As for the rest of your comments, there have been enough debate on ethanol per se; it's something I continue to discuss with crop researchers here and I expect to continue to buy ethanol fuel for the near term. I'm paying for energy subsidies, one way or the other, (have you looked at the tax breaks oil companies get, or the cost of protecting trade routes?) - I'd just as soon they go to people I know.

So ethanol is mostly about supplementing farm income for you, yes? This is exactly the problem I have with it. And frankly, I'm all for getting rid of all subsidies for all industries. Too many hogs feeding at the taxpayer trough.

[WildCat]

Originally Posted by GreyICE

I'm skeptical about this.

The US uses 1.8 billion bushels of corn for ethanol. That's 50 million tons.

Worldwide grain harvest alone (ignoring all other food substances) was 2.3 BILLION tons.

Somehow I don't buy this 75% nonsense.

I'd like someone to explain why we need ethanol from corn, and why we should all pay for it through mandates and subsidies.

So far, all the ethanol supporters in this thread have done is claim it's not as bad as everyone says it is... hardly a convincing case for the continued use of corn ethanol.

[Childlike Empress]

Here is another quote from the article in the OP:

Originally Posted by The Guardian

The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

Bolding mine. So the effect of sparked speculation, which according to the World Bank drives prices up higher, is blaimed on biofuels and included in their 75% number.

[GreyICE]

Originally Posted by WildCat

I'd like someone to explain why we need ethanol from corn, and why we should all pay for it through mandates and subsidies

So far, all the ethanol supporters in this thread have done is claim it's not as bad as everyone says it is... hardly a convincing case for the continued use of corn ethanol.

Wow, I wonder why we've been doing that?

Checks threat title:
Biofuels have forced food prices up 75%

The case has been made in other threads, and is not the subject of this thread. Nice Red herring, better bring in global warming too.

[WildCat]

Originally Posted by GreyICE

Wow, I wonder why we've been doing that?

Checks threat title:
Biofuels have forced food prices up 75%

The case has been made in other threads, and is not the subject of this thread. Nice Red herring, better bring in global warming too.

My post was directly related to the OP. There is evidence that corn ethanol is driving up the price of food, there is no evidence it is reducing reliance on oil imports.

I'm waiting for someone to justify corn ethanol, so far all we've heard is that it's good make-work for farmers who deserve taxpayer's and consumer's money more than they do.

Maybe we should just move move all the farmers who need these subsidies into public housing in some big city where they can live off the government dole properly, and let more competent people take over their farms they apparently can't manage without taxpayer assistance.

[Beerina]

I'd say stuff like this was the law of unintended consequences, however things like this are, and were, predictable.

[davefoc]

It seems wildly implausible that food prices are up 75% in terms of constant currency valuations.

I didn't read the article but is there any evidence for a 75% increase in food prices anyplace in terms of a constant currency valuation?

It seems even more unlikely that US ethanol production is a major part of that issue. Yes it is a wildly corrupt program with no benefits anticipated for the taxpayer or global warming but is it even a significant reason for the increased food costs in the US? High fuel costs would seem to be a much more significant factor behind higher food costs in the US. And Ethanol theoretically is at least in the range of break even with regard to fuel usage (it creates about the same amount of fuel that it replaces). And at least some of the corn plant that is left over from ethanol production can serve as animal feed and that theoretically might reduce the cost of meat and dairy.

On the speculating brothers that cornered a market mentioned by drkitten:
It was the Bunker brothers and they managed to successfully corner the silver market and drive the price up substantially and lose a fortune in the process when the price of silver crashed. My parents ended up with a few bucks of Bunker money when they unloaded some silver coins at the peak of the market.

[WildCat]

Originally Posted by davefoc

It seems wildly implausible that food prices are up 75% in terms of constant currency valuations.

What effect do you think taking 25% of the US corn crop off the table and into the tank should have? Bear in mind that this was a record crop from a record amount of acreage under corn, as farmers switched to corn from other crops.

Quote:

It was the Bunker brothers and they managed to successfully corner the silver market and drive the price up substantially and lose a fortune in the process when the price of silver crashed. My parents ended up with a few bucks of Bunker money when they unloaded some silver coins at the peak of the market.

"Bunker brothers"?

[davefoc]

Originally Posted by WildCat

...

"Bunker brothers"?

Ugh, Hunt brothers, sorry.

http://en.wikipedia.org/wiki/Hunt_brothers

[davefoc]

Originally Posted by WildCat

What effect do you think taking 25% of the US corn crop off the table and into the tank should have? Bear in mind that this was a record crop from a record amount of acreage under corn, as farmers switched to corn from other crops.

I went looking for information about your question.

I didn't do enough research to provide a quantitative answer but I came away with the idea that I was right and wrong.

I was right in that the effect of a rise in the price of corn has only a very small effect on the overall rise in the cost of food in the US.

I was right (sort of) in that the added demand on corn from ethanol is not a strong driver of corn prices.

But I was very wrong in something that I didn't consider. The price of corn is now tied to the price of gasoline. When the price of gasoline goes up the price of corn goes up because the corn can now be used to replace gasoline.

I didn't keep track of the web sites that led me to these ideas and I stand by the idea that I could still be substantially wrong. Please feel free to do a better job than I did on answering your question.