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December 1, 2008

 

US Ohio corn growers against abolishing ethanol subsidy

 
 

Corn growers are against the call of livestock groups, restaurants and corporate food companies that is asking President-elect Barack Obama to end the nearly US$5 billion in annual subsidies for the ethanol industry.

 

Ohio corn growers accused corporate food producers of continuing to charge high prices and reap big profits even as corn prices plunge.

 

Corn futures went from a peak of US$7.88 this past June to US$3.85 in mid-November, while gas prices have dropped about US$2 a gallon since the summer. But consumers continue to pay significantly higher food prices, said Dwayne Siekman, executive director of the Ohio Corn Growers Association.

 

The numbers, he said, show that the desire for big profits, not the growing ethanol industry, is driving up food prices. A number of major food producers, including General Mills and Kraft, had double-digit revenue increases in the last quarter.

 

Ethanol production, which has grown in Ohio and uses about 25 percent of the nation's corn supply, props up prices by 10 percent to 20 percent, Siekman said. But, he added, US farmers produced 13.1 billion bushels of corn this year, up from about 11 billion, so the nation continues to produce a surplus.

 

Industry experts say there is a lag between a drop in commodity prices and prices on store shelves, because manufacturers and livestock producers often buy products in advance. The U.S. Department of Agriculture projects food prices will rise as much as 6 percent, but it also notes that increases should subside next year if commodity prices stay lower.

 

Continued ethanol subsidies pit food needs against fuel needs, so "the unprecedented volatility we've experienced in commodity prices will only continue," said Scott Openshaw, spokesman for the Grocery Manufacturers Association.

 

"Even after recent declines, farm-level corn and soy prices have more than doubled since 2005-06. Retail food costs continue to reflect record commodity prices and volatility."

 

Corn is a also common feed ingredient of most livestock.

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