By JANE HOUIN
Ohio Correspondent

WASHINGTON, D.C — Sen. George V. Voinovich (R-OH), last week officially requested a study by the Government Accountability Office (GAO), the government’s investigative arm, to report on the rising cost of food prices.

“While shopping for groceries at their local markets, American consumers are finding themselves having to navigate a sea of price inflation,” Voinovich said. “This is leading many to make some difficult decisions as to what they can afford for themselves and their families, especially those with fixed incomes or receiving government subsidies such as food stamps.”

Specifically, Voinovich wants to know the major factors contributing to the rise in food prices both nationally and globally and the role federal ethanol incentives play in this crisis.

Additionally, he wants to know the effect of permanently high food prices on the economy and which groups in the country are most affected by high food costs.

While many factors are being blamed for the surge in food prices, Voinovich says no clear consensus has developed as to what factors are resulting in the biggest impact. He said Congress needs factual information on those causes to make informed policy choices to address the issue.

Among the most commonly blamed culprits for the rise in food prices are high energy and fertilizer prices, increased labor costs, poor harvests worldwide, the weak U.S. dollar, increased global demand, speculators moving into the commodity market and an increased demand for biofuels.

“Americans are hurting in so many ways that if we don’t start now it will become even more difficult to help in the future,” Voinovich said. “We need to stop debating whether there is a problem and start taking action to help people deal with the problems that are so obvious in their daily lives. Before you can start to fix a problem, you have to know the cause. That is why I’m asking the GAO to conduct this study – so we can develop common sense solutions that tie directly to the root cause.”

While the rising cost of food in the U.S. and overseas is receiving increased media attention, a range of complex factors are behind this relatively new phenomenon said American Farm Bureau President Bob Stallman. He said ethanol is “not the culprit that American consumers are being led to believe,” and he stressed that renewable fuel and affordable food can coexist.

“We want to make sure that America’s consumers have a clear picture of this volatile and very complicated food price situation,” Stallman said. “Farmers are also deeply concerned about the issue of hunger, both on the global scale and here at home. We want to ensure that food is available and affordable to all global citizens.”
Farm Bureau analysis of the costs of food production and marketing shows petroleum-based energy is the primary factor driving domestic food prices. Forty-four percent of rising food costs is due to energy costs, according to AFBF.

“This means energy sources like natural gas, oil and gasoline,” Stallman said. “After many commodities leave the farm gate, high costs for energy, fuel and transportation are added and passed onto the consumer.”

The farmer’s share of the retail food dollar has hovered around 25 percent since the 1970s. The larger portion of the consumer’s food dollar goes to pay for processing, transporting and marketing food products after they leave the farm.

In addition, Stallman said world food prices are escalating because of other complex issues such as growing world demand, particularly in nations such as China and India, as well as lower supplies due to droughts elsewhere in the world.

Stallman stressed that market forces would lead to increased food production by farmers worldwide, thus lowering prices. He cautioned against governments enacting policies that would intervene in markets, saying such measures would be counterproductive to securing prices that are more moderate globally.

“I want to assure everyone that in the United States of America, there is not a food shortage,” Stallman said. “Our nation’s productive and efficient farm families continue to produce a full range of healthy and abundant foods and we will continue to do so.”

In his letter, Voinovich cited the steady rise of the cost of food both nationally and globally in the past few months coupled with the 4 percent U.S. Consumer Price Index increase for all food in 2007 along with the projected 4–5 percent increase in 2008.

Those are the highest annual increases since 1990 according to the USDA. In addition, global food price increases have been even more dramatic: approximately a 75 percent increase since 2000.
Voinovich is a ranking member of the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia.

This farm news was published in the May 7, 2008 issue of the Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.