Are corn growers the cause of higher food prices?

The Grocery Manufacturers Association and other groups involved in a campaign called "Food Before Fuel"  say yes.

Kansas corn growers, on the other hand, insist the answer is no.

The GMA claims that corn prices have risen as more corn growers have diverted their crops for ethanol production. Not only has that driven up food prices in the U.S., say the grocers, but it’s also causing a spike in world food prices and an increase in global hunger.

Congressman James McGovern, a Massachusetts Democrat who co-chairs the House Hunger Caucus, summed up the GMA’s argument in a recent press release prepared by a public relations firm retained by the GMA.

“Federal policies promoting and mandating ethanol production aren’t the only reason for the unprecedented increase in food prices, but we have a responsibility to make a difference when we can,” said McGovern. “We can’t control the weather, and we can’t control the economy in Asia. But we can begin shifting our resources toward the development of next-generation biofuels and away from policies that divert our food supply to our fuel supply.”

The Food Before Fuel Movement is attempting to persuade Congress to lift a 2007 mandate that requires that 9 billion gallons of ethanol be produced in 2008. That requirement would rise to 36 billion gallons by 2022.

But, Kansas corn growers and ethanol producers are strongly refuting the contention that the diversion of corn for use as fuel is a major factor in higher food prices or increasing global hunger.

Sue Schulte, director of communications for the Kansas Corn Growers Association, told KansasLiberty that higher food prices are primarily attributable to higher fuel prices.

Schulte conceded that the per-bushel price of corn has risen in the past few years, since Congress enacted its first ethanol mandate. Two years ago, corn was selling for about $2 a bushel. “We had growers who were getting the same bushel price, or less, than their grandparents and that’s not sustainable, especially considering higher production costs.”

Now, corn is selling for about 5.25 per bushel.

But Schulte argued that, like other consumers, farmers are coping with higher energy prices and higher prices for other materials and products. And, even though more corn is undeniably being converted into ethanol, she also pointed out that corn production in Kansas and in the U.S. generally goes up every year, weather permitting.

Last year, in fact, Kansas produced 518 million bushels of corn, a record. Kansas ethanol producers, using both corn and sorghum, refined about 440 million gallons of ethanol, also a record in Kansas.

According to a website, "Renewable Fuels Now," created by ethanol producers to counter the GMA’s campaign, only 1.8 billion bushels of the 10.74 billion bushels of corn produced in 2006 in the U.S. were diverted for ethanol. Schulte said only about 15 percent of the Kansas corn harvest went to ethanol production last year.

Furthermore, ethanol producers say the price of corn is a very small factor in overall food prices, with only about 10 percent of U.S. corn going to human food products.

Schulte said that the vast bulk of corn grown in Kansas has traditionally been used not for human consumption, but for livestock feed. And, she pointed out that a byproduct of the ethanol refining process, called distilled grains, is a cost-effective, concentrated, nutrient high food source for livestock, so it’s erroneous to say that corn is wholly “consumed” in the production of ethanol.

“The refining process takes the starch out of the corn, but about one-third of it comes back out as distiller’s grain. We don’t get credit for that from the Grocery Manufacturers Association.”

Schulte said many corn growers have teamed up to develop ethanol plants in Kansas.

Typically, Schulte said those plants are located in smaller communities with small tax bases and few job opportunities, so they’re welcomed with enthusiasm.

“We talk a lot about rural development in Kansas, and this is one way to help achieve that,” Schulte said. “These plants can have a huge impact on smaller communities because they create jobs and contribute to the tax base.”

Joyce Martin, city manager of Garnett, home of the East Kansas Agri-Energy Garnett, said the plant is already having an impact, even though it’s exempt from property taxes for its first 10 years of operation.

Martin said 36 jobs had been created at the plant, and plant workers shop and in some cases pay taxes in Garnett. In addition, materials needed to keep the plant operating are frequently bought from Garnett merchants.

When the tax abatement expires, the economic impact of the plant will swell.

“The mayor and I were looking at the plant’s assessed valuation (if it was currently on the tax rolls) and we were like, Jiminy Christmas, this will just make budgeting so much easier. It will have an overwhelming impact on the whole area.”

In fact, she said when the plant goes on the tax rolls, every mill of the property tax levied in Garnett will generate an extra $16,000 annually. At the current mill levy rate, Garnett’s treasury would reap an annual dividend of about $800,000.

“The school district and the county also would see corresponding increases in their property tax collections,” Martin said.

Schulte said the ethanol industry in the U.S. last year provided 6 billion gallons of refined, domestic fuel to the U.S. fuel supply.

“At a time when our nation is seeking alternatives to imported petroleum, ethanol is already here, and is already part of the solution,” she said.

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 - Phil LaCerte

The Week in Review