By TIM ALEXANDER
Illinois Correspondent

BLOOMINGTON, Ill. — Information provided by the Illinois Farm Bureau (IFB) on its Farming for You website offers a compelling argument that corn ethanol is not entirely to blame for the recent surge in prices at the supermarket.

“In this entire food price discussion, many intelligent people have failed to recognize that there’s very little correlation between commodity prices and food prices,” IFB President Philip Nelson said. “Let’s put this into its proper perspective: A gallon of milk that used to contain about six cents of corn (at $2 per bushel corn) now contains about 18 cents worth of corn at today’s prices.”

He added agricultural economists at Texas A&M University concluded that while doing away with the federal renewable fuels standard (RFS) might lower corn prices by as much as 30 cents per bushel, it would have almost no effect on prices consumers pay for milk, bread, meat or eggs.

In late April, University of Wisconsin ag economists said speculative investment in commodity markets is the main culprit in higher corn prices, with ethanol and exports listed at a distant second and third. In addition, Iowa State University researchers said recently that from 1995-2007 ethanol caused retail gasoline prices to drop anywhere from 29-40 cents per gallon.

“Ethanol is helping to moderate record fuel prices and is putting dollars back into consumers’ pockets,” said Nelson. “It is helping to revitalize the rural economy by creating jobs and by enhancing agriculture’s ability to satisfy an ever-growing demand for both food and fuel.”

Information provided by the IFB shows that at today’s rate of gasoline usage, a 35-cent drop in the price of gas saves consumers about $50 billion per year. According to the American Coalition for Ethanol, ethanol in the nation’s gasoline supply saved drivers more than $100 million during the three-day Memorial Day weekend.
The IFB points to a study by Informa Economics released in December that finds there has “historically been very little relationship between corn prices and consumer food prices ... the statistical evidence does not support a conclusion that the growth in the ethanol industry is driving consumer prices higher.”

In fact, researchers noted, only 4 percent of the change in the food consumer price index is “explained” by fluctuations in nearby corn futures prices. Rather, there is no one factor but a “complex and interrelated set of factors that contribute to food prices.”

While Rick Perry – governor of Texas, the nation’s biggest oil and gasoline-producing state – may insist a rollback of the RFS would lower grocery prices, researchers at Texas A&M feel differently.
They concluded the underlying force for driving changes in the agriculture industry, and the economy as a whole, is higher energy costs in the form of $100-plus-per-barrel oil.

In addition to launching its new pro-renewable fuels website, IFB has also purchased radio airtime for five new commercials tackling what it calls food price misconceptions.