Food-related industries launch anti-biofuel campaign
Bloomberg News
Industry groups representing companies including Kellogg, Tyson Foods and Kroger are coordinating efforts to reduce U.S. biofuels-use requirements with a new "Food Before Fuel" lobbying campaign.
The Grocery Manufacturers Association, the American Meat Institute, the National Restaurant Association and other groups say rising corn-based ethanol production is pushing food costs higher. Adding industry muscle to fight a federal requirement to about double ethanol production to 15 billion gallons by 2015 may slow the increase, helping company profits and easing consumer prices, said grocery association chief Cal Dooley.
"We are calling on Congress to step back and re-evaluate our biofuels policy, which is distorting the marketplace and harming the environment and consumers," Dooley, a former Democratic congressman from California, said in an interview before the campaign was officially unveiled today.
Dooley said the coalition will try to persuade members of Congress to relax ethanol-use rules, reduce tax credits for U.S. ethanol blenders and lower a tariff on ethanol imports.
The GMA, which represents Kellogg, the largest U.S. cereal maker, and Kroger, the largest food-store chain, as well as Coca-Cola, Kraft Foods and ConAgra Foods, and the other groups may also buy advertising to get their message across, he said.
Ethanol may contribute as much as 25 percent to the faster-than-usual gain in U.S. food prices, the Department of Agriculture has said. U.S. food inflation may be 5.5 percent this year, the highest rate since 1989, the department said last month.
Strain on Tyson
Biofuels are straining companies such as Tyson Foods, the largest U.S. meatpacker. Chief Executive Officer Richard Bond has said that costs for animal feed, which competes with ethanol for corn, have increased enough to make higher meat prices inevitable. Corn futures have jumped 72 percent in the past year.
The campaign also includes advocates for the poor and the environment, Dooley said, showing wide-ranging concern about the social and economic impacts of biofuels.
Ethanol's impact on food prices has led companies and some members of Congress, including Senator John McCain of Arizona, the presumptive Republican presidential candidate, to call for the Environmental Protection Agency to relax ethanol-use requirements lawmakers passed in December.
Ethanol Production
Ethanol producers including Poet LLC, Archer Daniels Midland Co. and VeraSun Energy Corp. operate 151 ethanol plants in the U.S. with capacity to produce 8.69 billion gallons a year, according to the Renewable Fuels Association in Washington. An additional 51 plants are being built and seven are being expanded, which will boost capacity to about 13.6 billion gallons.
Biofuels defenders, which include the Bush administration, say ethanol's effects on food costs are exaggerated, citing studies that show rising oil costs, the declining U.S. dollar, and possibly commodities speculation are bigger causes of inflation.
"While corn-based ethanol is a factor in the price increases in food, certainly it is not anywhere near one of the major driving factors in food price increases," Agriculture Secretary Ed Schafer told reporters last week at a global conference on food prices and biofuels in Rome.
"Our ethanol policy of energy security, of better environmental factors, and a reduction in the cost of petroleum use in our country is the right policy direction," he said.
Globally, ethanol is causing 2 to 3 percent of global food-price gains, Schafer said. The Washington-based International Food Policy Research Institute says biofuels production has contributed about 30 percent to the rise in food prices.
Prices for staples such as corn, wheat and rice were 47 percent higher in April than a year earlier, according to the International Monetary Fund. The World Bank says as many as 33 nations may face unrest because of higher food prices.
