Economy, not corn, causes price increases

Much has been written over the past several months about food price increases. Reporters – and even some food retailers – seem to be quick to blame ethanol production for the current situation. As a farmer, I would like a chance to address the hype and correct the record.

A number of complex economic factors are behind the increase with the most significant being record high oil prices. The price of oil has tripled in the past three years into triple digits, driving up production costs throughout the food chain.

In addition, the value of the U.S. dollar, which has been dropping since 2002, recently hit historic lows against other major foreign currencies. It means when we import food items like coffee, bananas and seafood, our dollars don’t stretch as far as they once did. At home, manufacturers and the food service industry are facing higher labor costs.

Overseas, the standard of living in developing economies like China and India is on the rise. Not only are these economies consuming more energy, their citizens have more buying power which has increased the global demand for food.

Recent studies show there’s very little correlation between higher commodity prices and consumer food prices. On average, the American farmer receives 19 cents for every dollar spent at a grocery store or restaurant. For highly processed items that contain corn, they receive just pennies on the dollar.

Despite the recent run up in food prices, Americans still only spend a small percentage of their disposable income on food. Compared to a gallon of gasoline or diesel, that gallon of milk is still a bargain.

Before we condemn a clean burning, domestic energy source like ethanol, all I ask is that you take a step back and recognize there is a lot more to food price story.

Roger Grace

Urbana