The president of FarmEcon suggests reductions in the affordability of food resulting from American renewable fuel policies have harmed U.S. foreign relations.
A FarmEcon study, which looked at data from the U.S. Departments of Commerce, Labor and Agriculture to assess food affordability in the United States from 1950 to 2005, when the U.S. introduced its renewable fuel mandate, found increased ethanol production has coincided with dramatic increases in the cost of producing food.
FarmEcon president Dr. Tom Elam says increased grain, soybean and hay prices have added significantly to the cost of producing the U.S. food supply driving up food prices 50 to 60 percent faster than the average rate of inflation.
The impact of higher grain prices has been felt world wide and it’s been felt more keenly in those countries where raw agricultural commodities make up a much higher percentage of the cost of producing the food basket that these people in places like Africa consume.
As a result of this decreasing affordability of food we have seen riots in places like Algeria and Egypt and more radical governments have taken over.
It certainly has not been a help at all to U.S. foreign relations with countries that used to be our allies and, particularly Egypt. which is a key political force in the middle east has become much less favorable toward the U.S. with this new government of theirs so there has been political fallout from these rising food prices as well as the economic impact on the global food affordability situation and food affordability in the U.S. and Canada.
Dr. Elam suggests there needs to be additional flexibility written into the law or reductions in the renewable fuel standards mandate that will accommodate the realities of agricultural markets and the impact that these mandates are having on food prices.
