As unrest over rising food prices grows internationally, several factors are being blamed for the increases. One reason for higher food costs: the use of grains to produce biofuels. But just how much of an impact are biofuels having on food prices? During today's OnPoint, Jon Doggett, vice president of public policy at the National Corn Growers Association, says commodities prices are having a minimal impact on the price of food. He says population growth and oil prices are contributing more significantly. Doggett also discusses how, he believes, the 2007 biofuels mandate will affect long-term food and grain costs.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Jon Doggett, vice president of public policy at the National Corn Growers Association. Jon, thanks for coming back on the show.
Jon Doggett: Thank you for letting me be here.
Monica Trauzzi: Jon, we had Scott Faber of the grocery Manufacturers Association on the show last week and he was talking about the food to fuel issue and your organization has a very different view on whether the use of corn for fuel is causing the rise in food prices. He's drawing a direct link between the two. Do you believe that the use of corn for the production of biofuels is having an impact on our grocery bills?
Jon Doggett: It's negligible. And, in fact, probably the presence of ethanol in the gasoline market is bringing down the cost of gasoline that you're going to use to drive to the store that should probably end up being cheaper than the increase you're going to see in food costs. There's a couple of things here. One is the price of corn. Is ethanol driving the high price of corn? In part, but there's a lot of other factors that are driving corn prices to go up. We have a world economy that is wanting to use more corn. We're exporting more corn. We're using more corn for a lot of other reasons, a lot of other places. We have a financial market that has moved from the mortgage market and the stock market into commodities and driven all commodities much higher than anyone really thinks are sustainable. So, we have a high price of corn, but does that really impact the food price and how much? So, a lot of reasons to have a high price of corn. A lot of reasons, you know, things that go into that food that you're going to buy at the grocery store.
Monica Trauzzi: The price of corn is not just high; I mean it has grown, multiplied three times almost over the last couple of years. How do you account for something like that? Are we putting too much corn towards biofuels? Is the demand too high?
Jon Doggett: No, not at all. It's part of what we're using, but, again, there's a lot of folks in the world that want to have some corn. They're using corn to feed livestock in this country and around the world. There are folks that want to have some meat with their rice. They want to have some cheese on their cracker. Those are the things that are really driving demand for corn and other feed grains around the world. It's a world market. The use of corn in ethanol, we're just taking the start out. We're leaving the protein. We're not losing the food value in that corn that we're using for ethanol; we're just going ahead and enhancing the corn.
Monica Trauzzi: So, is the use of corn for biofuels production responsible at this point, knowing what we know, seeing what we're seeing around the world? Is it responsible to use corn for biofuels production?
Jon Doggett: Absolutely, absolutely. And we have a lot of factories that are increasing the price of corn. Ethanol is part of that, but it's not the biggest part of that.
Monica Trauzzi: What impact do you believe the 2007 biofuels mandate is going to have moving forward on the price of food and the price of corn? Is this something that we are going to see continuing to climb? Because these mandates sort of haven't - we haven't seen the impacts yet. As time goes on, what's going to happen to the price of food and the price of corn?
Jon Doggett: Our trend line yields are going up significantly. We are using better seed corn than we've ever used before. Every year that gets better and better. Our yields are going up exponentially and so I think we're going to have an opportunity to meet that demand, meet the demand in the world market, meet the demand for our traditional customers in the livestock industry, meet the demand for industrial uses, meet the demand for food.
Monica Trauzzi: Last week British Prime Minister Gordon Brown said his government is concerned that biofuels are causing food prices to rise around the world and he's urging G8 nations to take a closer look at the use of crop-based fuels. Is he wrong here or should we really be reconsidering the use of crops to produce biofuels?
Jon Doggett: Well, I think there's a lot of folks that have talked about concerns, but they don't look at the numbers. We've had a number of studies that have been released recently that show that the use of corn in ethanol and the use of other feedstocks for ethanol around the world isn't creating this huge increase in food prices. There's a lot of other reasons. You know, last week Texas A&M, not a school in a state that's noted for being a strong ethanol proponent, they released a study that says that the ethanol mandate has a negligible impact on the price of food. And that's substantiated and it's substantiated by other studies. So, again and again we're seeing some folks who ...
Monica Trauzzi: But then there are many other studies that point directly to the use of corn causing high food prices.
Jon Doggett: Where are they? Which ones?
Monica Trauzzi: All over! We've seen it in the latest edition of Time magazine. There was a big spread on that.
Jon Doggett: But that wasn't a study. Those were some folks making some estimates; those were folks making some statements.
Monica Trauzzi: But in his reporting, Michael Grunwald did cite specific studies.
Jon Doggett: Well, I'd like to see how well those studies match up to things like the Texas A&M study, the studies that are being done at USDA. We are not really showing that happening. You know, we're taking 20 percent of our crop, we're making ethanol out of it, but we're also taking the distillers dried grain, which is a component, the backend of that process, and we're using it for feed. That's a very high-value feed that is going to livestock industry. It's not like it disappears. The corn is still there. The feed component is still there. We're just taking the starch out.
Monica Trauzzi: How do you respond to the growing unrest that we're seeing throughout the world? It's being described as a global food crisis and we're seeing that in Haiti and Indonesia and people are pointing the finger at the use of biofuels. How do you respond to that and what do you think should be done to help bring the food prices down?
Jon Doggett: We're not traditionally, I don't know if we've ever sent much corn to Haiti or ever sent much corn to Indonesia. Those are not countries that use much corn. They're also not countries that are diverting feed or food into biofuels. These are, again, the classic example of why the price of food is being driven by something other than biofuels.
Monica Trauzzi: So, the immediate response here would not be to reduce the amount of grain we're using for fuel?
Jon Doggett: Absolutely not! I think it would be a horrible mistake to do so. I think we would then do two things. One, we would increase the price of gasoline and two we would send a market signal to the corn industry at the very wrong time to go ahead and not produce more corn.
Monica Trauzzi: Do you think opening up conservation land, the CRP land, would sort of help alleviate some of the pressure that the corn industry is feeling to produce?
Jon Doggett: There's not a lot of acres in CRP that would be adaptable to raising corn. There might be some on the margin. You know, it's a voluntary program. We're going to see folks getting out. They may or may not re-enroll, but we've seen, as acres have come out, we've seen a few more acres not be re-enrolled as we've seen in the past, but not a lot. We're not seen a net reduction in CRP acres that's significant. We're seeing a reduction of maybe 5 percent of the CRP acres total.
Monica Trauzzi: An argument we constantly hear from pro-biofuels groups is when cellulosic ethanol comes along we're not really going to have this same issue. We're not going to have this debate over food to fuel because we're not going to be using corn as much. What does that mean for the groups you represent though, the corn growers? What's going to happen to them once we do implement cellulosic ethanol?
Jon Doggett: Well, let's take two scenarios. The first is, is that you replace corn acres with switchgrass. And if you go ahead and make ethanol from switchgrass that came from acres that you were growing corn on, you don't have any distillers dried grain. You take all of that feedstock and it all goes into fuel. So, we have something that produces both fuel and feed. Secondly, we're anticipating that the movement to cellulosic will be evolutionary rather than revolutionary. We're going to see things like corn cobs or corn stocks, corn stover, there will be those kinds of feedstocks that are already been produced that could be used in a plant in conjunction with corn ethanol production.
Monica Trauzzi: Obviously, the concern over biofuels extends beyond the food to fuels issue and there have also been many reports in recent months about emissions and that biofuels are not helping us reduce emissions. They're actually causing an increase in emissions. And mixed into all of this is the deforestation issue. How do you respond to that? Do you think that we really need to be looking at the overall emissions here?
Jon Doggett: Well, in the United States we're not cutting down forests to go ahead and raise corn. It's not happening. That kind of thing may be happening in other parts of the world, but that's not happening here. We're not tearing up virgin ground. We're not cutting down forests to go ahead and produce corn. So, those emissions that they're talking about aren't existing - you know, increases aren't existing in the United States.
Monica Trauzzi: Did you ever imagine, six months ago, that there would be such a backlash towards biofuels as we've seen in the last couple of months?
Jon Doggett: Yes and I think the reason is that we saw a lot of folks with a lot of money opposing this in the energy bill. They spent millions of dollars to go ahead and oppose this. They're still spending money today. I think that they're looking at a bottom line for their industry and I'm not surprised really. I think that corn will come down. What's going to be interesting is to have the folks who have said that the increased cost of corn is creating this huge increased cost in food, when corn comes back down are we going to see those food costs retract? Are they going to come down? Are food manufacturers going to go ahead and take that money and reduce the price of corn flakes or whatever else they have on the shelf? I don't think so.
Monica Trauzzi: Do you see the price of corn coming down in the near future?
Jon Doggett: I think it will because we've never, in this country, have had a time when a farm commodity has increased in value significantly, that farmers haven't gone out there and done what farmers always do, they'll overproduce. They're producing to the market. That's six dollar corn or five dollar corn, that's a huge incentive for growers to go ahead and raise a lot of corn. They're going to do it. They may do it fairly well this year. They're going to do it even better next year with some of the seed traits that are coming online year after next. We're going to overproduce. We always have overproduced.
Monica Trauzzi: All right. We'll end it right there on that note. Thanks for coming on the show, Jon.
Jon Doggett: Thank you.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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