We’ve known for a long time that the entire food versus fuel argument was full of holes. And food price trends since mid-summer this year have blasted another big gash right through it.
Food companies pushed the food versus fuel premise, saying the Renewable Fuel Standard (RFS) drove up food prices by promoting ethanol production. When crop production problems in the U.S. and around the world did drive corn prices higher in 2008 and again in 2011 and 2012, food companies pounced, blaming the RFS while jacking up prices to consumers.
Now, as everyone in farm country knows, corn prices have plummeted thanks to prospects of a bumper crop waiting in the fields around the Midwest. But the reaction by food companies has been pretty quiet, well really non-existent. Indeed, I haven’t seen a single press release in my inbox from a food company promising to give consumers a break at the supermarket because of sharply lower corn prices.
The truth is, of course, fluctuations in the price of corn or any other grain really have little effect on consumer food prices, as a recent study by the Renewable Fuels Association shows. That’s true all over the grocery store, from the meat counter, to the cereal aisle to the dairy section.
Packaging, transportation, labor and other supply chain costs are responsible for up to 88 percent of every dollar consumers spend at the supermarket. And instead of corn, it’s the price of energy that is really the big driver in those costs.
Ethanol and the RFS was a convenient scapegoat, but the food companies’ complaints never really made sense when you checked the real numbers.
Brighter signs in the RFS
Speaking of ethanol and the RFS, although it’s taken seemingly forever, it appears the Environmental Protection Agency (EPA) is planning to back off some of the cuts in ethanol requirements it originally set for 2014. A clear signal of that is that Big Oil is livid, accusing the Obama administration of caving into political pressure, especially from Democrats in farm states, according to The Hill, a publication that covers Congress.
No timetable has been set for the release of the 2014 requirements, but they are only about 10 months past their deadline.
But then, that might seem pretty timely based on how things tend to work in Washington these days.