Consumerist: Ethanol

Ethanol Raises Prices As Part Of Continuing Crusade To Liberate Nation From Expensive Foreign Oil

Carey — Sun, 17 Jun 2007 16:16:48 EDT

Ethanol is billed as the answer to America's addiction to foreign oil, but the immense demand for the corn, from which ethanol is made, is also raising prices in supermarkets and restaurants across the nation. The demand to transform corn into ethanol has already doubled the average price for a bushel of corn from $2 to $4.

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.

Michael Pollan best summarized our little-known reliance on corn in The Omnivore's Dilemma:

(Photo: Eduardo Mueses)

Corn is in the coffee whitener and Cheez Whiz, the frozen yogurt and TV dinner, the canned fruit and ketchup and candies, the soups and snacks and cake mixes, the frosting and gravy and frozen waffles, the syrups and hot sauces, the mayonnaise and mustard, the hot dogs and the bologna, the margarine and shortening, the salad dressings and the relishes and even the vitamins. (Yes, it's in the Twinkie, too.) There are some forty-five thousand items in the average American supermarket and more than a quarter of them now contain corn.This goes for the nonfood items as well: Everything from the toothpaste and cosmetics to the disposable diapers, trash bags, cleansers, charcoal briquettes, matches, and batteries, right down to the shine on he cover of the magazine that catches your eye by the checkout: corn. Even in Produce on a day when there's ostensibly no corn for sale you'll nevertheless find plenty of corn: in the vegetable wax that gives the cucumbers their sheen, in the pesticide responsible for the produce's perfection, even in the coating on the cardboard it was shipped in. Indeed, the supermarket itself—the wallboard and joint compound, the linoleum and fiberglass and adhesives out of which the building itself has been built—is in no small measure a manifestation of corn.

Corn, like the oil it is meant to supplant, is already everywhere; but don't worry just yet. Rick Tolman, chief executive of the National Corn Growers Association, is convinced that farmers will eventually ride this one-trick pony into the ground: "Farmers have a way of, every time prices go high, they almost always overproduce until they drive down the price to the marginal level where they can't make any money anymore." — CAREY GREENBERG-BERGER

The Rising Tide of Corn [Washington Post]

Ethanol Demand To Drive Milk to $4 A Gallon, With Other Prices To Follow?

Ben Popken — Mon, 11 Jun 2007 16:08:39 EDT

Ethanol, the motor fuel alternative to gasoline that has the potential to save Americans a fortune at the pump and reduce our reliance on foreign oil, isn't as cheap as the strict ethanol versus gasoline price comparison may appear. In fact, it may be more expensive when total costs are calculated, reports the AP and MoneyCentral.

How can this be? Ethanol is made from corn and, of course, the demand for ethanol has increased the demand for corn. The demand for corn has out-stripped farmers' ability to supply more corn and thus has resulted in increased prices for corn...

(Photo: amyadoyzie)

On June 4, corn sold for $3.77 a bushel. A year ago, the price was just $2.25 a bushel. That's a 67% jump in price in a year. (The futures markets say prices will stay here, too, with corn for December delivery selling at $3.83 a bushel on June 4.)"

Higher corn prices means higher meat prices as chickens, pigs and cows are fed more expensive corn. Many sweeteners are made with corn as are candies, soups, cake mixes, and baked goods. Even plastic, paper, adhesives and textiles contain portions of corn products. All are either up in price or expected to be. And, the one-two punch related to the fuel crisis is hitting milk prices especially hard:

Dairy market forecasters are warning that consumers can expect a sharp increase in dairy prices this summer. By June, the milk futures market predicts, the price paid to farmers will have increased 50 percent this year — driven by higher costs of transporting milk to market and increased demand for corn to produce ethanol. University of Illinois dairy specialist Michael Hutjens forecasts further increases of up to 40 cents a gallon for milk over the next few months. That would drive the cost of a gallon of whole milk around the country to an average of $3.78, based on the USDA's monthly survey of milk prices in 30 metro areas.

But the impact doesn't stop there. The increased demand for corn is sending prices up for non-corn products too.

With corn so profitable to plant, farmers have shifted acreage from soybeans, for example, to corn. So it's not especially surprising that the price of a bushel of soybeans was up 36% as of June 4 from a year earlier."

And in an irony that is almost too cruel to mention, the race to produce more corn has increased demand for (and increasing U.S. dependence on) fertilizers. Who makes much of the world's fertilizers? Yep, foreign oil and natural gas producers. So, what are we to do? In the short run, the only way to decrease the price of gas is to decrease demand — in other words, we need to use less gas. Some ideas for doing this include checking the air in your car tires, adjusting your driving habits just a bit, and biking to work. In the long-term, we need to decrease our dependence on gasoline. But you already knew that. — FREE MONEY FINANCE

How ethanol bites you in the wallet [MoneyCentral]
Forget worries about $4 gas ... now it's $4 milk [MSNBC]

RELATED: You Are What You Grow

Will More Fuel Efficient Cars Lead To Cheaper Beer?

consumerintern — Thu, 22 Feb 2007 15:04:19 EST

Gas guzzlers don't just spew more carbon into the air, they apparently affect the price of a cold, frosty brew:

Heineken CEO Jean-Fran ois van Boxmeer pointed out on Wednesday that the increasing demand for grain for biofuel will put pressure on the price of grain, and by extension on malt and hop prices as well, two important raw materials.

We're assuming he means that ethanol production is to blame for the spike in grain prices. (Corn is at a 10-year high today.)

But something seems fishy here. Beer — at least good beer — is made from barley, and we've never heard of barley being distilled into fuel additives. We have heard of wine being distilled into ethanol, which just seems so, so wrong... Corn remains the fuel crop of choice.

And why would the price of hops go up because of "biofuels"? Hops can't be converted into fuel at all.

Sounds to us like Heineken is just looking for an excuse to jack up prices.
— MARK ASHLEY

Cleaner fuel, dearer beer? [Expatica]
(Photo)

Why We're Paying But Not Hurting At The Pump

consumerist.com — Thu, 27 Apr 2006 10:17:36 EDT

If gas prices are at an all time high, why are consumers driving more? Are they just idiots? Or is the price of a gallon of gas not the only thing to compute?

Forbes' Nick Schulz thinks it's the latter: that people are driving more because energy, even at the current prices, is simply a better deal than it's ever been. Although energy prices are rising, energy intensity is declining. Whether you're a car driver, a home owner who needs to heat his house or a gigantic corporation that needs to consume energy to produce your products, you can produce more with less energy than you ever could before. Energy, overall, is less important to the economy than it ever has been before.

It's an interesting point: why aren't we seeing the sort of panic through the current energy gouging that we saw in past energy crises? What about you guys? Have you started gripping the nozzle a bit more tightly, shaking out the last few drops at the pump lately? Or are you driving as much, if not more so, than ever before?

Why The Pump Isn't More Painful [Forbes]