May 5, 2008

 

US food makers lobby Congress to limit corn usage in biofuels

 

 

US food manufacturers are lobbying in Washington in an active effort to reshape government policy on ethanol as costs for raw materials like corn rises.

 

The Senate's Office of Public Records reveal that several large packaged-food companies have hired Washington lobbyists or are using their internal teams to present their case against the use of corn to produce biofuels.

 

Kraft Foods has hired Washington D.C. firm DLA Piper to lobby on "energy policy and initiatives related to biofuels while Kellogg Co has been lobbying on the subject of "ethanol production", among others.

 

Earlier this week Kraft posted a 13-percent drop in first-quarter net income as raw material costs rises. Kellogg posted a 1.9-percent drop in first-quarter net income as its price hikes failed to completely offset rising costs and a higher tax rate.

 

Kraft now joins food groups like Tyson and Coca-Cola, whose raw ingredient costs have been rising thanks to biofuels.

 

"The food and feed people are beginning to realize what it means to have subsidies and tax breaks for the ethanol plants, said James Thurber, a professor of political science who teaches a course on public advocacy at American University in Washington, D.C. "They now are entering a period of active lobbying against the corn-based ethanol people."

 

Corn futures were up 61 percent for the 52 weeks ending April.

 

Food manufacturers say the diversion of the grain to produce ethanol is pushing up corn prices, making it more expensive for them to produce their food, and consequently higher prices for consumers. This means food manufacturers are joining other groups such as feed producers who are already arguing that diverting corn for fuel is making cattle feed prices more expensive and is partially responsible for the hike in milk and meat prices.

 

The Grocery Manufacturers Association has expressed concerns about the diversion of corn to produce fuel. The association - which is the main advocacy group for the food, beverage and consumer products industries - contends that policy makers need to accelerate the development of advanced biofuels made from non-food feedstocks.

 

One Washington lobbyist said food companies appear to have scaled up their lobbying in the last year or year and half. The ethanol group, on the other hand, has been lobbying for years, that lobbyist said.

 

Ethanol companies are ready and fighting back, arguing that food inflation is being driven by other factors like higher oil prices and growing demand from developing countries like China and India.

 

"Food prices are being driven, as we know, by record energy costs," said Patricia Woertz, chief executive of Archer Daniels Midland Co. (ADM), which produces corn-based ethanol, during a recent conference call.

 

Jon Doggett, vice president of public policy at National Corn Growers Association, argues that consumers would be facing even higher oil prices if it had not been for ethanol.

 

Doggett blames the rise in corn futures and hence prices on speculative investing in commodities.