Ethanol Demand Driving Up Grain Prices

SOUTH KOREA - No morsel of food will likely be spared on the groaning tables of Americans this holiday. Let diets be the ugly Grinch of this Christmas. And the eating and the, yes, gorging, will include large numbers of Christmas cookies, cakes and other holiday baked goodies.
calendar icon 27 December 2007
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These sugary baked creations will come at prices dearer than on other Christmases because of grain prices which are now at historic highs. The prices, in some cases, double and triple prices of only a few months ago, are a consequence of new wealth in the world, but also because we have chosen to pour corn into our gas tanks rather than into our pantries.

The world is in the midst of a grain price explosion, with farmers fetching record prices for wheat, corn, soybeans and other grains. That has sent flour, cereal and other food products prices climbing, including beef and other meats that are grain fed. Earlier this year, Mexicans protested in the streets because the price of tortillas had climbed to levels that made them unaffordable to the poor, a political earthquake in a country where the corn tortilla is the historic food staple. One reason Hugo Chavez in Venezuela is facing unrest among Venezuelans is the rising cost of food, a situation which he further exacerbated by imposing price controls on staples and thus making them also scarce.

Grain prices are a function of worldwide weather patterns and crop production. But as The Economist pointed out recently, the world has been experiencing bumper crops of cereals even as farmers are getting record prices. What's happening is that the world is simply demanding more grain and worldwide output has yet to catch up.

Part of that demand is triggered by wealthier Chinese and Indians who are eating more beef. That in turn has prompted more cereals to be used for feed grain rather than being consumed as bread. But it takes much more grain to feed a cow and turn it into food than for grain to be consumed as bread. But the primary reason for the crunch on grain supplies is the increased use of corn for fuel.

More farmers are raising corn for biofuels, squeezing corn supplies for cattle feed. Those soaring prices are causing more land to be switched from growing other grains to growing corn for ethanol, helped along by rich federal farm subsidies

Source: Korea Times
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