People in Maine and throughout the country are being squeezed between skyrocketing energy prices and soaring increases in food costs. Here and around the world, the rising cost of food is straining family budgets and putting more and more of the most vulnerable at risk of hunger.
There is no question that the impact of record high energy prices on food production and transportation would show up on grocery shelves. I am concerned, however, that another factor is contributing to this crisis – the increasing use of food crops to produce biofuels, such as corn-based ethanol.
On May 7th, the Senate Homeland Security Committee held a hearing to examine whether the recent change in American agriculture policy aimed at reducing our reliance on imported oil may be having serious, unintended consequences for food supplies and prices. As a leader of the Committee, I wanted to examine whether federal policies promoting corn-based ethanol are driving up the cost of basic foods.
There is compelling data to suggest that that is precisely what federal ethanol policies -- subsidies for ethanol production, tariffs on ethanol imports, and mandates for ethanol use -- have done. According to the World Bank, global food prices have increased by 83 percent in the past three years.
Here in the United States, the Commodity Futures Trading Commission reports, from a sampling of April 2008 prices, even more remarkable one-year increases: wheat is up by 95 percent; soy beans by 83 percent; corn by 66 percent; and oats by 47 percent.
Such increases in basic commodities naturally work themselves through the food-supply chain. According to the U.S. Department of Agriculture, consumer prices for all foods increased by four percent in 2007 – the highest annual rate since 1990 – and the Department projects continued increases.
The consequences reach far beyond data cells on some spreadsheet. They affect families who are forced to cut back on bread, meat, and dairy purchases and to apply their economic-stimulus checks to grocery bills. The nutritional threat, especially to lower-income families with children or to senior citizens with limited incomes, is clear.
The high prices and shortages also hurt small businesses. While our hearing witnesses included experts in agriculture and the global food supply, compelling testimony also came from a Mainer -- Andrew Siegel, the founder and vice president of When Pigs Fly Bakery in York. Since it was founded in 1993, this small business has grown to become a thriving enterprise with five retail stores throughout New England with 50 employees, and more than 250 supermarket clients.
This remarkable success story is threatened by the sharp spike in commodity prices. Mr. Siegel told the committee that the price he pays for wheat has increased from $7,700 per week last September to more than $22,000 this February, causing a financial hardship on his family-owned business and its employees. He said that ethanol policy is a factor in food prices and that that government should look at other potential sources of ethanol, such as switchgrass and other non-food crops.
I agree, and that is why the 10-Point Plan to achieve energy independence by the year 2020 that I proposed in the Senate last month calls for increased investment in cellulosic – non-food based – ethanol research and production. The time to act is now. In 1997, only five percent of the corn harvest was used for ethanol production. That portion grew to 20 percent of the 2006 harvest. The Department of Agriculture estimates that 24 percent of last year’s corn crop is currently being used for ethanol, and that ethanol’s claim on the 2008 harvest will climb to 33 percent. Not surprisingly, increased demand for corn-based ethanol has diverted acreage from crops like wheat and soybeans to corn and has had ripple effects on the cost of feed for livestock.
The global consequences are also grim. As World Bank President Robert Zoellick warned last month, “33 countries around the world face potential social unrest because of the acute hike in food and energy prices. For these countries, where food comprises from half to three quarters of consumption, there is no margin for survival.” The impact of rising prices, food shortages, and export restrictions has devastating consequences for the billion people around the world living in dire poverty.
Certainly, policies that promote corn or other food crops as ethanol inputs are not the only factors in the sharp increase in food prices. Other factors include higher food demand from emerging economies, higher energy costs, and weather events like the drought in Australia. Many of these factors are beyond our control. But, biofuel subsidies and mandates are within the control of the governments and are something that we can do something about.
This is not an abstract matter of public policy. It affects the poorest people in our country and our world. It affects our bakeries, markets, restaurants, and family kitchens here and around the world. Our hearing helped us to better understand the consequences of our current biofuels policy and made clear the direction we must take to achieve a more secure energy and food future.