The Volokh Conspiracy - How Ethanol Inflates Food Prices:

Food in the United States is relatively cheap -- but it could be even cheaper. There are a wide range of federal policies that increase the price of various foods. Federal marketing orders for various agricultural products increase prices for milk various fruits. Restrictions on sugar imports dramatically increase the price of sugar, and therefore increase the demand for sugar beets and corn syrup. And so on.

The Washington Post reports, the federal government's love affair with corn-based ethanol is further increasing a wide range of food prices.

The nation's unquenchable thirst for gasoline -- and finding an alternative to what's been called our addiction to oil -- has produced an unintended consequence: The cost of the foods that fuel our bodies has jumped.

Beef prices are up. So are the costs of milk, cereal, eggs, chicken and pork.

And corn is getting the blame. President Bush's call for the nation to cure its addiction to oil stoked a growing demand for ethanol, which is mostly made from corn. Greater demand for corn has inflated prices from a historically stable $2 per bushel to about $4.

That means cattle ranchers have to pay more for animal feed that contains corn. Those costs are reflected in cattle prices, which have gone from about $82.50 per 100 pounds a year ago to $91.15 today.

The corn price increases flow like gravy down the food chain, to grocery stores and menus. The cost of rounded cubed steak at local Harris Teeters is up from $4.59 last year to $5.29 this year, according to TheGroceryGame.com, which tracks prices. The Palm restaurant chain recently raised prices as much as $2 for a New York strip. And so on.

"Anybody that knows anything about the marketing of corn knows that when you raise the price of corn you are going to create problems in all of the markets that use corn," said Ronald W. Cotterill, director of the Food Marketing Policy Center at the University of Connecticut.

There are significant negative environmental consequences of the artificially increased demand for corn-based ethanol as well, some of which have yet to receive much attention. For instance, as corn prices rise in response to the incrased demand for corn, farmers are becoming less willing to let fields lie fallow or enroll their lands in various conservation programs. Higher corn prices mean that the opportunity costs of such choices are higher than they were before. In parts of the country, this could have a significant negative effect on wildlife habitat, particularly for migratory birds. So, even if one makes the (dubious) assumption that there are significant environmental benefits from switching to corn-based ethanol, such as a potential reduction in certain emissions, there are significant environmental costs as well.

	[Jonathan Adler, June 16, 2007 at 8:27pm] Trackbacks How Ethanol Inflates Food Prices: Food in the United States is relatively cheap -- but it could be even cheaper. There are a wide range of federal policies that increase the price of various foods. Federal marketing orders for various agricultural products increase prices for milk various fruits. Restrictions on sugar imports dramatically increase the price of sugar, and therefore increase the demand for sugar beets and corn syrup. And so on. The Washington Post reports, the federal government's love affair with corn-based ethanol is further increasing a wide range of food prices. The nation's unquenchable thirst for gasoline -- and finding an alternative to what's been called our addiction to oil -- has produced an unintended consequence: The cost of the foods that fuel our bodies has jumped. Beef prices are up. So are the costs of milk, cereal, eggs, chicken and pork. And corn is getting the blame. President Bush's call for the nation to cure its addiction to oil stoked a growing demand for ethanol, which is mostly made from corn. Greater demand for corn has inflated prices from a historically stable $2 per bushel to about $4. That means cattle ranchers have to pay more for animal feed that contains corn. Those costs are reflected in cattle prices, which have gone from about $82.50 per 100 pounds a year ago to $91.15 today. The corn price increases flow like gravy down the food chain, to grocery stores and menus. The cost of rounded cubed steak at local Harris Teeters is up from $4.59 last year to $5.29 this year, according to TheGroceryGame.com, which tracks prices. The Palm restaurant chain recently raised prices as much as $2 for a New York strip. And so on. "Anybody that knows anything about the marketing of corn knows that when you raise the price of corn you are going to create problems in all of the markets that use corn," said Ronald W. Cotterill, director of the Food Marketing Policy Center at the University of Connecticut. There are significant negative environmental consequences of the artificially increased demand for corn-based ethanol as well, some of which have yet to receive much attention. For instance, as corn prices rise in response to the incrased demand for corn, farmers are becoming less willing to let fields lie fallow or enroll their lands in various conservation programs. Higher corn prices mean that the opportunity costs of such choices are higher than they were before. In parts of the country, this could have a significant negative effect on wildlife habitat, particularly for migratory birds. So, even if one makes the (dubious) assumption that there are significant environmental benefits from switching to corn-based ethanol, such as a potential reduction in certain emissions, there are significant environmental costs as well.