By TIM ALEXANDER
Illinois Correspondent

KULM, N.D. — Just as in 2008, corn producers and ethanol industry leaders are fending off allegations that corn-based ethanol is driving up the price of food – even though a USDA study shows that food prices have risen only slightly in 2010.

The latest salvo fired against corn-based ethanol came from Ian Goldin, a former vice president of the World Bank and current director of Oxford University’s Oxford School, who reignited the food versus fuel debate Oct. 19 while addressing a global financial panel at a conference in Naples, Fla.

“We should be clear in our minds that this causes people to die of starvation,” said Goldin, referring to his assertion that committing more corn acreage for fuel would lead to global food shortages.
He said the poorest countries will suffer from U.S. commitment to ethanol. Ethanol production, he added, makes little sense from either economic or environmental viewpoints. (See related article by Ann Hinch for details.)

Goldin’s remarks came just a few days after the U.S. Environmental Protection Agency (EPA) announced an increase in the amount of ethanol that can be blended into gasoline to 15 percent, up from 10 percent for cars manufactured after 2006.

Shortly after Goldin’s comments, CNN reported that makers of breakfast cereals in the U.S. would raise their prices or reduce the amount of cereal they put in a package. Bart Schott, president of the National Corn Growers Assoc. (NCGA) and a corn grower from North Dakota, said the comments and the food industry’s ensuing reaction were unrealistic.

“In a box of Corn Flakes, there is a whole four cents’ worth of corn in the whole box,” he said.

Schott feels several factors combined to create the latest food-versus-fuel flap, including the USDA’s adjusted expectations for the nation’s 2010 corn crop.

“There has really been some exciting news on ethanol and its advancement this fall,” Schott said. “There was the E15 announcement, and then the announcement that NASCAR will go green with E15 fuel for their cars.” (See page 1B this week for details.)

“Then the USDA (downwardly) adjusted their yield (projection) for corn, and that has gotten the market pretty excited. I think the market overreacted to some of these events. Let’s just wait until the harvest finishes up; we still think this will be the third-largest corn crop in history and that we will have enough corn to meet all demands.”

Schott feels that USDA’s adjusted harvest projection for corn was too low. With bumper crops expected in North and South Dakotas – along with Minnesota and Nebraska – he expects yield losses in some Midwest states to be offset. And when one considers the amount of corn still stored from the 2009 harvest, no one should worry about shortages, according to him. “We still have close to a billion bushels of carryout in the corn for next year,” he said. “There is no immediate shortage of corn.”

Any increase in food prices this year, Schott speculated, would more likely have been a result of the Russian drought that killed its wheat harvest and caused the nation to halt exports of the commodity.

“When Russia stopped exporting wheat this summer, that’s when prices really would have taken off,” said Schott, who is a member of the National Corn-to-Ethanol Research Advisory Board and serves as the NCGA delegate to the U.S. Grains Council.

He said those in the ethanol and agriculture industries were expecting some sort of attack after the EPA’s E15 blend announcement and the USDA’s lowered corn yield projection.
“We knew there would be some push-back from the Grocery Manufacturers Assoc. and even the American Meat Institute (AMI) after some of these events,” Schott explained.

“As soon as there is positive news about ethanol, they try to throw the food scare out there.”

AMI, along with the National Turkey Federation, opposed Growth Energy’s petition of the EPA to raise the ethanol blend wall above E10 in 2009, saying an increase would divert nearly half of the U.S. corn crop from food and feed to fuel. The organizations claimed any economic value added by more ethanol production would be offset by higher costs, lost sales and increased business risks elsewhere in the economy.

Anticipating anti-ethanol groups would once again raise the “red herring” of the food-versus-fuel debate, the Renewable Fuels Assoc., NCGA and other ethanol leaders issued a statement Oct. 12, noting, “It’s not surprising that the corporate interests which have profited by hiking the grocery bills of everyday American families would continue to promote the widely-disproven ‘food-versus-fuel’ fiction.

“It is sadder to see the other groups be so misled as to think that ethanol is anything but a job-creating, renewable, clean-burning fuel.”

Mark Lambert – a spokesperson for the NCGA who posts corn and ethanol news and opinions on his blog at www.corncommentary.com – called Goldin’s comments “irresponsible” and “incendiary” after a World Bank report from 2008 blaming corn and ethanol for higher food prices was debunked.

“Former is the key word in (Goldin’s) title here, because it was a bogus World Bank report that set off the food-versus-fuel media hysteria in 2008 that tried to finger corn and ethanol for higher consumer prices,” Lambert said.

“World Bank later recounted, saying that the report was mistaken and not properly fact-checked, and it was soaring petroleum prices and wild speculation in the markets topping the list of food price drivers. Apparently, Mr. Goldin missed the memo.”

Ephraim Leibtag, of the USDA’s Economic Research Service (ERS), said food prices should remain weak and fairly stable across the board into 2011, when a food increase of 2-3 percent can be anticipated through spring. Leibtag said the increase is on par with historical norms and that modest inflation is a sign of a recovering economy, Lambert reported.

An indication of post-election Congress’ commitment to the future of ethanol will come before Dec. 31, the deadline for a policy decision whether to extend a 45-cent tax credit for ethanol blenders.