Ethanol: Food, Feed and Fuel

July 31, 2008

Fuel prices and higher world grain demand are the primary drivers of the increase in food prices, according to a new report released today.

The report, The Impact of Ethanol Production on Food, Feed and Fuel, was produced by Ethanol Across America and co-sponsored by the Nebraska Ethanol Board. The findings confirm a recent study by Purdue University, which found that record high oil prices have caused 75% of the inflation in corn prices.

Ethanol is reducing gas prices. In Nebraska, about 77% of all gasoline sold contains ethanol. E10 is typically 10 cents cheaper than regular and economists have found that ethanol production lowers oil prices by 15% nationwide. Ethanol will save Nebraska motorists more than $70 million at the pump during 2008 according to the Nebraska Ethanol Board.

Ethanol Board Chairman Jim Jenkins said that ethanol generates a resounding economic benefit to Nebraska by lowering gas prices and providing livestock producers with lower-cost feeding alternatives.

As a cattle producer and restaurant owner, I am directly impacted by skyrocketing energy prices. High energy costs hit everyone hard, but Nebraska ethanol is lowering gas prices. Ethanol also provides relief for the livestock producer with high quality, low cost feed in the form of distillers grains, Jenkins said. The Nebraska economy is significantly better off as a result of our $4 billion ethanol industry, which has made our state a net exporter of motor fuels.

Todd Sneller, administrator of the Nebraska Ethanol Board, said the report confirms what he hass seen in other studies: that high energy prices and world demand are the leading factors in higher food prices.

The vast majority of food costs are from processing and transportation, so obviously high energy prices affect food prices much more than the price of corn, Sneller said. Meanwhile ethanol is lowering gas prices for everyone.

The Impact of Ethanol Production on Food, Feed and Fuel is available for download on the Resources page at www.ethanol.nebraska.gov.