IE 11 is not supported. For an optimal experience visit our site on another browser.

White House defends food-based biofuels

The Bush administration is defending its decision to push food-based biofuels as food costs rise at home and abroad, saying the renewable fuels are only a small part of the problem.
/ Source: The Associated Press

The Bush administration is defending its decision to push food-based biofuels as food costs rise at home and abroad, saying the renewable fuels are only a small part of the problem.

Some have blamed the food crisis in part on policies backed by the White House and Congress that divert corn, soybeans and other crops to fuel.

The governor of Texas and a quarter of the Senate, including the GOP's presumptive presidential nominee John McCain, asked the Environmental Protection Agency earlier this month to cut this year's requirement for 9 billion gallons of corn-based ethanol in half to ease food costs.

Agriculture Secretary Ed Schafer said Monday that the increased use of biofuels may have some small, short-term costs, but those do not outweigh the ultimate benefits of reducing the country's dependence on oil.

"It's clear that while bioenergy generation does have some effect on prices, it's not a major effect, it's not even a big effect," Schafer said.

Corn prices have grown dramatically in recent years, almost tripling since 2005. Along with high prices for other crops, they have been pushed along by the burgeoning biofuels industry as well as rising worldwide demand for food, trade barriers, bad weather in some regions of the world and other international factors.

According to Department of Agriculture economists, higher corn prices increase animal feed and ingredient costs for farmers, ranchers and food manufacturers, but pass through to consumers at a rate less than 10 percent of the corn price change. They say retail food prices would rise less than one percentage point above the normal rate of food price inflation — 2.5 percent — when corn prices increase by 50 percent.

White House economic advisers have said ethanol made from corn is responsible for just 2-3 percent of the overall increase in global food prices, which are up more than 40 percent this year over last year.

Opponents say that's still too much.

Texas Sen. Kay Bailey Hutchison, a Republican, on Monday introduced a bill to freeze the current mandate to produce nine billion gallons of ethanol this year. Energy legislation passed last year would require that 15 billion gallons be produced by 2015.

The Grocery Manufacturers Association, a trade group that represents Kraft Foods Inc., Nestle SA, General Mills Inc. and other large food companies, has been lobbying Congress to revisit the mandates and increase research funding for cellulosic ethanol, made from plant matter.

"Converting food into fuel is a luxury that our global community just can't afford," said Scott Faber, vice president of federal affairs for the association. "We think America needs to hear both sides of this debate."

A five year, $290 billion farm bill passed by both the House and Senate last week would make small steps in that direction, cutting a per-gallon ethanol tax credit for refiners from 51 cents to 45 cents and increasing funding for cellulosic ethanol.

Corn-based ethanol still has a lot of friends in Congress, though, and revising the mandates will be an uphill battle.

Like the administration, South Dakota Sen. John Thune says the skyrocketing price of oil is a major factor in rising food costs. And because ethanol is cheaper than gasoline, these supporters argue, it's cutting the costs for consumers at the pump.

"When oil is traded at record highs, as it seems to do on an almost daily basis, the cost of gasoline and diesel fuel go up and with it the cost of production and shipping," Thune said.