apparently regarded as being relatively
protected from increases in retail food
cost since the farm price of commodities, according to USDA, accounts for
only 20 percent of total purchases.
The Energy Independence and Security Act of 2007 would require greater
diversion of soybean oil to biodiesel.
Again USDA maintains that the increase in the CPI for all food will only
be 0.2 to 0.3 percentage points and
would raise the IMF Global Commodity Price Index by 1 to 2 percent.
intense animal industry are faced with
escalation in feed cost which cannot
be passed on to consumers without
markedly depressing demand. There
is a chorus of opposition to the current U.S. biofuels policy from virtually
every international agency and agro-economist not affiliated to the present
Administration. The U.S. egg industry
will consume 363 million bushels of
corn in 2008. Each $1 per bushel in-
crement in cost will add 5 cents/dozen
eggs and impose an incremental cost of
$8.6 million per week to the collective
feed bill of the U.S. egg industry. The
impact of an increase in corn from $3
to $7 is over 20 cents per dozen without
completely taking into account the parallel increase in the cost of other grains,
DDGS and soybean meal, which are
both directly and indirectly influenced
by diversion of corn to ethanol. EI
Nine billion gallons of ethanol
In 2008, refiners will incorporate 9
billion gallons of ethanol into the nation’s gasoline supply. It is calculated
that this will save 7. 2 billion gallons
of gasoline, which would otherwise
have to be refined with 60 percent of
the required feedstock derived from
imported oil. USDA and the Department of Agriculture estimate that without blending ethanol into gasoline,
pump prices would be 20 to 35 cents
per gallon higher than at present, taking
into account the 51 cent per gallon tax
credit for ethanol blenders. The USDA
and DOE assume that by 2012, two billion gallons of advanced biofuel will be
derived from cellulosic sources and not
from corn.
The USDA/DOE document, which
includes a detailed appendix with tables and figures supporting the Administration action, raises a number of
questions. There is no mention of importation of ethanol derived from sugar
cane, which is available in Brazil but is
currently subject to an exclusionary tariff. The Administration is relying on the
current ethanol refining capacity and
the output from new plants amounting
to an additional 6 billion gallons per
year to supply the U.S. market. It is apparent that with current ethanol prices
a plant can only recover variable cost
of production and that despite subsidies
some plants are closing due to losses as
the price of corn as a feedstock rises.
Disconnect
Clearly, there is some disconnect
between the USDA/DOE calculations
and the realities faced by producers
and consumers. All segments of the
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