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Pricing power

With enough political courage, Congress could do something about higher food prices

Issue: "Food fight," May 3, 2008

Many forces are at work in bringing about higher food prices. One of those forces-the diversion of land and crops to biofuel production at the expense of food production-is unlike the others: Congress has the power to change it.

Droughts in Australia and elsewhere contributed to crop shortages, but lawmakers cannot do anything about the weather. Economic growth in relatively poor countries like India and China is increasing demand for food, but nobody should want to end that process. Biofuel production, on the other hand, is a result of government mandates and subsidies, and with the right political will it could end quickly.

Just how much ethanol and other biofuels are adding to the problem of higher food prices is a matter of some debate, but most analysts agree that it is significant. The International Food Policy Research Institute estimates that biofuels account for up to a third of the recent spike in commodity prices. The International Monetary Fund blames biofuels for half the jump in demand for food crops.

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In December, President Bush and Congress mandated that 36 billion gallons of ethanol be used for fuel annually by 2022, a six-fold increase that includes 9 billion gallons this year. The legislation, which was extremely popular with corn growers, was meant to move the United States toward energy independence and help the environment by decreasing dependence on oil.

But energy analysts like Ben Lieberman of the Heritage Foundation say that, in addition to raising food prices, ethanol doesn't achieve those goals: It doesn't lower prices at the pump and the clearing of lands for biofuel production actually harms the environment. Ethanol policy, Lieberman says, also hits Americans in the pocketbook more than once: "It's costing us more to drive to the grocery store; it's costing us more at the grocery store; and it's costing us more at tax time."

Lieberman says ethanol mandates are starting to divide the politically powerful agriculture community, as beef producers and others balk at higher feed prices. Such fissures haven't yet cracked ethanol's privileged status on Capitol Hill, but some grumbling may be going on behind the scenes. Rep. Jim McGovern, D-Mass., an opponent of ethanol mandates, told The New York Times that "a secret vote" in Congress would show "there is a pretty large number of people who would like to reassess what we are doing."

Timothy Lamer
Timothy Lamer

Tim is managing editor of WORLD magazine.

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