Wednesday, June 11, 2008

Grocery Manufacturers Association Begins the Campaign

The Grocery Manufacturers Association has begun an all out assault on American agriculture and the US policy of using more homegrown biofuels. At a time when food companies are seeing record high prices, GMA has sought to deflect attention away from themselves by launching a PR campaign in an attempt to rollback policies adopted within the last year about future US goals using biofuels.

GMA has started a website www.foodb4fuel.com that attempts to lay out their case for higher food prices. But GMA was recently taken to task by US Senator Chuck Grassley of Iowa for blatantly misrepresenting the facts surrounding ethanol:

“A national association employing high-priced Washington, DC spin doctors has launched a misleading and disingenuous assault on ethanol,” Grassley said. “The facts are that biofuels are a very small factor in rising grocery costs and just 19 cents of every food dollar spent by consumers goes to farmers. I’m calling on companies who are members of the Grocery Manufacturers Association to protest the trade association’s target and tactics. Every employee of these member companies can join in. We’ve got to speak truth to power and fight back against this smear campaign.”


But farmers are pushing back and working to get the public engaged in knowing the truth about biofuels and have created their own website with facts www.foodandfuel.com.

University of Wisconsin-Madison Professor Randy Fortenberry has released a study that concludes that ethanol is not the only reason for increase in fuel prices. His report is here

He states in part:
Ethanol production capacity expanded from about 5.5 billion gallons on late 2006 to almost 11 billion gallons by late 2007 (Renewable Fuels Association). USDA has reported the average U.S. cash corn price for first quarter 2006/2007 to be $2.54 per bushel. By first quarter 2007/2008 the average price had risen to $3.34, and by December 2007 the average price was $3.88 per bushel. Thus, corn prices increased 32 percent between the first quarter of the 2006/2007 marketing year and the first quarter of the 2007/2008 marketing year, and another 16 percent during December 2007. Since ethanol production capacity essentially doubled between the first two quarters of the last and current marketing years, the model results above suggest that ethanol’s contribution to the price rise was about 41 cents per bushel, ceteris paribus. This would have resulted in an average 2007/2008 first quarter price of $2.95 per bushel had nothing else changed. While this is a significant year over year increase, it is substantially less than the actual price appreciation between the start of 2006/2007 and the start of the 2007/2008 marketing year. As a result, while ethanol production has had a significant and positive impact on corn price, it does not fully explain price level changes in the 2006/2007 marketing year.
What these findings illustrate is the completely off base campaign being made by the Grocery Manufacturers Association.


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