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Food and Fuel Talking Points

Domestic Issues

The rising cost of oil is creating domestic retail food prices to rise, not corn.

• Consumer goods, including groceries, are heavily dependent upon energy (petroleum energy) for processing, packaging and transportation.

• Energy prices have twice the impact on the Consumer Price Index for food than does the impact from corn prices. Source: LEGC, LLC, “The Relative Impact of Corn and Energy Prices in the Grocery Aisle”

• A $1 per gallon increase is the price of gas is triple the impact on food prices as is a $1 per bushel increase in the price of corn. Source: LEGC, LLC, “The Relative Impact of Corn and Energy Prices in the Grocery Aisle”

• In the last 60 years:

  • Corn prices have increased less than 247%

  • Oil prices have increased more than 4,231%

• Corn is an input in SOME grocery items (livestock, dairy and poultry)

• Energy is an input in ALL grocery items (production, processing, packaging and shipping)

• Historically, food prices have surged during times of higher crude oil prices. Source: Federal Reserve Bank of Kansas City, “What is Driving Food Price Inflation?”

Corn costs have little impact on the cost of processed foods.

• During the past decade, the food processing industry has benefited from artificially low corn prices but did not pass these savings on to consumers.

• Whether the price of corn rises or falls, the price of meat and milk has generally trended upwards.  This reflects the sticky pricing of retail food products – prices may rise when costs increase; but they will not fall when the cost of inputs fall.

• Farm Costs (including grain) comprise 19 cents of every food dollar.  The remaining cost comes from labor, marketing and transportation.

  • In the last 30 years, the farm cost in the food dollar has decreased by more than half.

Corn production increases are higher than amounts of corn used for ethanol.

• U.S. Ethanol production has increased steadily since 2002, but the increases in the U.S. corn supply have more than offset the ethanol increases

  • After corn used for ethanol is removed, the remaining corn supply has still increased every year

  • Here are the numbers (total corn supply – corn for ethanol = remaining corn supply):

    • 2007:  14,393Mbu – 3,010Mbu = 12,175Mbu (22% of this crop went to ethanol)

    • 2006:  12,512Mbu – 2,129Mbu = 10,898Mbu (17% of this crop went to ethanol)

    • 2002:  10,573Mbu – 1,093Mbu = 9,669Mbu (10% of this crop went to ethanol)

    • 2015 projection: 17,232Mbu – 4,695Mbu = 13,989Mbu (27%  projected to ethanol)

• Ethanol production is becoming more efficient every year:

  • 2002: 350 gallons of ethanol per acre

  • 2006: 404 gallons of ethanol per acre

  • 2007: 435 gallons of ethanol per acre

Global Issues 

Corn diverted from ethanol is not the contributor to a World-Wide food crisis

• Corn for ethanol comprises 2% of the worldwide corn market.

• Worldwide demand for grain is increasing, especially with a growing middle class in places like China and India being able to afford a better diet with more protein.  (see chart below)