All actions create a reaction, we all know that. But sometimes we do not fully realize all the consequences of an action.
A few months ago, the US congress passed a law to mandate an increase in the use of bio-fuels, mostly ethanol. The most efficient way to create ethanol would be from sugar, but there are duties on imported sugar, such as sugar cane from Brazil (a strong ethanol user). This is meant to give support to US corn farmers, which are currently suffering from record high corn prices.
Think this will affect the price of your corn flakes and you are already thinking you are willing to suffer an increase in the cost of your breakfast to help the environment? Well, it will happen, but in a limited fashion... in the same way we constantly complain that packages are filled with air... the packaging costs of the cereal box are actually higher than the cost of the corn in your corn flakes. The price will rise, of course, but not that much.
But other things actually will increase in price. Experts now are calling for milk prices to rise 9% this year (from already record prices, if you haven't noticed!)... of course cows are fed with corn and other feed. It will mean the farmer's costs will need to be passed on. Or else, well, some of them will go out of business, reducing supply, which would also mean higher prices anyway.
What else? Well, once you are done with the milk, butcher the cow right? Expect meat prices to rise in a similar fashion as well.
And there are so many other unexpected results... Mexico's staple food is corn tortillas. Prices there have risen 400% already on corn tortillas (since they were really cheap to start with they are seeing pretty much the full increase in corn costs). And it will get worse since Mexico imports a lot of its corn from the US (who produces something close to half the planet's corn). There is a high chance that due to ethanol demand corn exports from the US will diminish!
I won't get started on the benefits (or lack thereof) of corn-based ethanol.. that'd be an entire post.
Price of corn has little to do with price of corn flakes.
A 14 oz box of corn flakes has about 10 oz of milled corn in it. For every $1.00 the price of corn goes up the cost of the corn in the box is about 1.1 cents (that's right)
Any prices beyond this are just an excuse to gouge the stupid consumer and blame the farmer. Nothing more.
Ethanol ain't the problem
Posted by: Frank Goudy | July 05, 2007 at 01:42 AM
Hi Frank,
Thanks for your post, and I apologize for not being there since then!
You are right about the price of corn flakes, and this probably why the grocery bill is not climbing at the same rate as the raw stuff (by now wheat, corn and other prices are up 4 fold in a few years). But going up it does. We can see it more easily on things like eggs and milk going on at a fast pace.
I still think ethanol is the most stupid policy in many years. It is awful for the environment, as it takes a lot of water and fertilizer to grow the corn, and it is using our food supply to move our fat behinds. The upside is that the less food we have to eat, the less corn we'll need to move it so in the end it will balance out.
In any case, by itself corn-based ethanol is a waste of time as it barely adds up any energy to the equation. Sugar-cane based ethanol is far more efficient.
I see a lot of farmers getting the blame for this, as you mention, but I agree that they shouldn't. The price of their inputs is going up very fast as well (diesel, fertilizer, seeds, etc) and they're not making more money out of this.
Posted by: Tempus | June 02, 2008 at 11:13 AM