The Blame Game

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The Blame Game

WASHINGTON -- Defending itself against charges that the corn price spike was making food more expensive, the ethanol industry said last week that the blame instead lies with surging oil and gasoline prices, which are driving up the cost of U.S. groceries.

Consumer groups and environmentalists have blasted ethanol, made mostly from corn in the United States, for sending a shock wave through the food system as the grain is pulled away from the food crop to produce fuel, Reuters reported.

The Renewable Fuels Association (RFA), an ethanol group, released a study last Thursday that chided critics who claim corn is responsible for the lion's share of the food price increase. "Hyperbolic rhetoric is being substituted for fact," Bob Dinneen, president of the RFA, told reporters on a teleconference. "Critics in the animal feeding and oil industry in particular are using scare tactics to frighten the American consumer to believing their unsupported claims."

U.S. food consumer prices, as measured by the government's Consumer Price Index, have increased from a year-over-year rate of 2.5 percent in September 2006 to 3.7 percent this past April, according to Reuters.

The RFA-funded study found a $1.00 increase in the price of gasoline will result in a 0.6 percent to 0.9-percent increase in consumer food prices, compared to a 0.3-percent jump resulting from a $1-per-bushel rise in the price of corn.

"One of the reasons why energy prices have a much larger impact on retail food prices than does the price of corn ... is they affect the entire food system" ranging from production to transportation, said John Urbanchuk, author of the study.

The industry's critics, however, found the study unconvincing.

Lester Brown, president of environmental research group, Earth Policy Institute, said the report did not consider the corn spike's potential to boost other prices for grains, such as wheat and rice. "Historically, when the price of one grain rises, it makes output of other grains scarce as farmers maximize output of the expensive grain. In turn that pulls up prices for a wide variety of foods," he told Reuters.

"Oil is a factor, but I don't think it explains these very substantial rises in grain prices that began a year ago and are now beginning to translate into higher food prices," he said.