What is in this article?:
- Fast food industry dishes RFS scare tactics
- Facts worth noting
- RFS fallout: The National Council of Chain Restaurants (NCCR) is rolling out a campaign of scare tactics and half-truths. In both a study and a Wall Street Journal guest opinion piece, NCCR managed to avoid any discussion of what really drives food prices — energy costs.
Facts worth noting
• Ethanol is not produced from the sweet corn that humans consume. It is made from field corn, which is used for livestock feed and industrial purposes.
• One-third of every bushel of grain used in the ethanol process is returned to the market as nutrient-dense livestock and poultry feed.
• Less than 3% of the global grain supply will be used by the U.S. ethanol industry in 2012.
• 39 million metric tons of animal feed were produced by ethanol plants in 2011. That’s 6,000 pounds of feed per beef cow at feedlots across the United States.
• 7 hamburgers per person worldwide could have been produced from the ethanol industry’s 2011 animal feed output. That is 50 billion hamburgers.
• Only 14 cents of every dollar spent on food is related to agricultural ingredients. The remaining 86 cents goes to energy, packaging, food processing and other costs.
• There is a near perfect correlation between U.N. food price index & World Crude Oil prices, highlighting the fact that energy costs drive food prices.
Specifics on recent food prices:
• Big Food complains that “food prices have spiked nearly 18% since 2005,” the year the first RFS was passed by Congress. That’s an average of just 2.57% per year, which is right in line with the 20-year average for annual food inflation, and far below food inflation rates from the 1970s and 1980s. Further, food prices since 2005 have advanced at a slower rate than general inflation. That’s hardly a “spike” in our book.
• Additionally, 2010 saw the lowest year-over-year food inflation in nearly 50 years. Meanwhile, the ethanol industry produced a record amount of fuel that year. In fact, the ethanol industry used more corn in 2010 than it will use in 2012.
• The food groups decry the 18% “spike” in food prices since 2005, but fail to mention the 55% increase in retail gasoline prices, the 60% increase in diesel prices, and the 68% increase in crude oil prices since 2005. If there was any truth to the myth that retail food prices have increased abnormally since 2005, it would be mostly because of surging energy prices. Every step in the food supply chain is affected by energy prices.