Pricing power

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

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.