Yesterday, members of the House of Representatives gathered in the nation’s capital to learn about the negative effects of the Renewable Fuel Standards (RFS) program on food and gasoline costs.

The RFS is a regulation that requires 36 billion gallons of renewable fuels—much of which consists of grain ethanol produced from corn—in the nation’s fuel supply

Amidst a worsening drought that’s consuming almost half of the nation, the country’s farmers and ranchers are struggling to produce the corn supply necessary to meet the demands of food producers and U.S. consumers, said Bob Goodlatte, the vice chairman of the House Agriculture Committee, who hosted the hearing.

Goodlatte said that the corn crop is consistently shrinking and the FDA continues to reduce corn crop harvest estimates, which will result in higher food prices.

The concern about corn stems from the fact that it’s the leading cost-driver in American food production, said Dr. Thomas Elam, an agricultural economist and president of FarmEcon LLC.

In fact, corn accounted for almost $43 billion in food production costs last year alone, soaring past the No. 2 and 3 food commodities (soybeans, accounting for $19 billion in 2011, and wheat, $8 billion, respectively).

Elam also reported that since 2007 (the year RFS kicked in), food price inflation has doubled and inflation price for corn-heavy food products has tripled.

Because corn is used as feed for many animals, meat and other product prices have soared in turn, causing consumers to purchase less of them. While the per-capita consumption of beef, pork, chicken, and turkey was 221.4 pounds per person in 2007, it fell to an estimated 200.5 pounds in 2012.

Goodlatte reported that in 2011, almost 40 percent of the U.S. corn crop was used to produce ethanol, resulting in diminished supplies for livestock and food producers and, ultimately, higher prices for consumers.

“Last year was the first year ever that ethanol production used more of our corn supply than feeding livestock and poultry in the United States,” Goodlatte said, adding that concerns exist about having enough corn supplies to both satisfy the RFS and the needs of food producers.

“We should not be in a position where we are choosing between fuel and food,” he said.

To remedy the situation, Goodlatte proposed legislation that would reduce upward pressure on corn prices when stocks are tight and reduce price volatility for both corn and gasoline.

“The current policy is unfair and is causing unintended negative consequences for American consumers, livestock farmers, and food manufacturers,” Goodlatte concluded.

By Mary Avant

News, Outside Insights