Dakota Beacon

Food prices are rising and often the farmers get blamed for it. However, they are the last ones at fault. So what are the reasons?
The University of Michigan found that primary agricultural production was responsible for 21.4 percent of the total energy used by the food system. Transportation made up 14 percent, food processing accounted for 16 percent, packaging for seven percent, food retailers and wholesalers for four percent and restaurants and the food services industry used seven percent. Home use was responsible for 32 percent by inefficient or more refrigerators and freezers, blenders, mixers and food processors instead of knives and chopping blocks.

The total amount of energy used by the U.S food system was 2.6 quadrillion Btu more in 2002 than in 1997.  Population growth accounted for 25 percent (now about 210,000 more a day in the world), consumers buying more increased 6.6 percent and technology has replaced human labor.   About 40 percent more energy is used to produce an egg and egg products—such as liquid, frozen, and dried for food products.

Increased grain prices in 2008 were mostly based on the corresponding jump in oil prices. The food sector is very sensitive to rising fossil fuel costs.

Oil prices are about $100 a barrel in late February due to the growing crisis in Libya as Gadhafi   starts destroying oil pipelines. They produce about two percent of the world’s supply of oil but about 85 percent goes to Europe with about one-third of that going to Italy.  Only a fraction comes to the United States but markets are reacting.

Some companies are already trying to fool the public rather than increase prices by making boxes thinner, packages smaller (such as sugar and coffee), bottles have a deeper dent on the bottom or are more slender and toilet tissue is narrower.

    A recent USDA report indicating a smaller year-end corn surplus, combined with rising corn costs, has intensified the food vs. fuel debate. Critics of biofuels claim that the increase in ethanol production and corn prices have driven an increase in food costs.

The February 2011 USDA World Agriculture Supply and Demand Estimate shows ending stocks for the U.S. corn marketing year at 675 million bushels, down 70 million bushels and the lowest since 1995. The department says the change comes from slight increases in the estimates of corn for ethanol use and of the use of corn in sweeteners and starches.  USDA is estimating a world grain supply (wheat, rice, corn, etc.) less than one percent smaller than last year’s record amount of more than 2.7 billion metric tons.

Corn prices have risen from $3.50 per bushel in July 2010 to $6.10 in January 2011.  The use of corn for ethanol has increased and is expected to take 39 percent of this year’s field corn crop.

USDA says that corn used for seed and food has risen from 5.9 billion bushels in May 2010 to a projected 6.2 billion bushels in January 2011, with the amount of corn used for feed increasing by 60 million bushels, despite a reduction in U.S. livestock herds.

U.S. corn exports have grown by nearly 434 million bushels as extreme weather events, such as drought in Russia and Ukraine, and flooding in Australia, plus rising demand in developing countries like India and China.

A 2009 Congressional Budget Office report said that ethanol production contributed a very small amount to the significant 5.1 percent increase in food prices and said that higher energy costs, including oil, had at least twice the impact on the cost of food.

 A World Bank report released in August 2010 concluded that energy costs and some commodity market speculation were principle instigators of the spike in food prices in 2008. Another study shows the use of agricultural products for energy has no more than a minor impact on retail food prices because less than 5 percent of the cost of corn flakes or corn syrup, for example, is derived from the price of corn. In many cases, a farmer could give their product away and it wouldn’t affect the final price of food.
 U.S. ethanol production utilizes just three percent of the world’s grain supply.  They use strictly coarse grains, not food grains like rice, wheat and sweet corn. The World Bank confirms that biofuels do not represent a large percentage of worldwide grain and oilseed use.

Advancing technology is expected to make dried distillers grain (DDG), a byproduct of ethanol now fed to cattle, a more useful substitute for pork and poultry. About one-third of every bushel of corn, that is used to make ethanol, is returned to the feed market as DDG. As a result, of the 39 percent of last year’s corn crop used for ethanol, 15 percent of that crop is being returned to feed for livestock.

Corn-based ethanol is blended in 90 percent of America’s gasoline supply. The National Corn Growers Association says that as much as 15 to 20 billion gallons of ethanol can come from corn without disrupting other markets.  A study by the Department of Energy found that the U.S. could displace more than one-third of its current oil consumption with biofuels while continuing to meet demands for food, feed, and export.

Experts say that diesel fuel only makes up 30 percent of the total energy used on a grain and oilseed farm. They say 50 percent is used to manufacture and transport nitrogen fertilizer. Nearly 80 percent of the energy needed to put dinner on the table is consumed by other parts of the food sector after a product has left the farm.
Cornell University researchers say that consumers burn about 2,700 British thermal units (Btu), a standard measure of heat energy, transporting any product home from the supermarket.  Processing 2.2 pounds of chocolate or coffee requires energy equal to a half gallon of gasoline.

American’s supply of fresh fruits and vegetables is now decreased due to frost and cold weather and even some in Mexico is affected. There is difficulty in getting them to the markets and higher fuel costs are added to the price. News in late February claims that prices for these products could double or triple and will last at least a month.  Will the prices then go down?  It makes you wonder.



Marlene Kouba is the National Energy Chairman for Women Involved in Farm Economics (WIFE) and has held that position for several years. She was a delegate to national energy meetings in Denver and Washington, DC.  She is chairman of the ND State Health Council. She was an elementary teacher, lives on a farm near Regent, and is active in numerous organizations and community activities, including politics. Her husband, Richard served in the ND House, but is deceased and they have 9 children.