President, National Corn Growers Association
On the same day that the U.S. Department of Agriculture slashed its projection of 2008 corn to be used for ethanol production by 300 million bushels, USA Today published an interview with Kraft CEO Irene Rosenfeld that included one of the most blatant exaggerations we’ve seen in this whole phony “food versus fuel” debate.
And trust me … we’ve seen a lot of blatant exaggerations. Not to mention lies and half-truths.
Rosenfeld, along with other ill-informed entities, continues to blame food supply shortages and the cost of food increases on corn -- while food companies report record profits and the cost of corn and fuel has been sliced in half in the past few months.
Obviously, Rosenfeld doesn’t follow politics very much because she would see that President-elect Obama has been clear in his support of biofuels, including corn ethanol. This week, when he appointed former Iowa Gov. Tom Vilsack as his Secretary of Agriculture nominee, he could not have driven the point home more completely. “Tom understands that the solution to our energy crisis will be found not in oil fields abroad but in our farm fields here at home.”
Kraft lobbyists will have a lot of hard work to do in the years ahead. And the company certainly can afford it – its net revenues, at $10.5 billion for the last reported quarter, 19 percent higher than the same period last year.
We are left wondering, though, what exactly Rosenfeld was referring to when she made her statement that “Forty percent of the food supply is being diverted from food supply.” That comment alone shows she doesn’t understand much about corn or the food supply.
Time for a math lesson. The corn that goes into ethanol production, were we to assume 3.7 billion bushels, would require about 24 million acres of farmland. This is less than 14 percent of the acreage planted this year for principal crops (not even including fruit and vegetable crops), and it ignores the fact that 1 billion bushels of distillers grains will be produced as livestock feed along with the ethanol from this same 3.7 billion bushels.
If you looked at the use of farmland worldwide for biofuels production, the number is even further from what Rosenfeld claimed. The U.S. Department of Energy reports that only 1 percent of all farmland globally is used for biofuels production.
In fact, when you look at uses for corn in the United States, we have been meeting all needs quite well. And the idea that increased ethanol production was behind the run-up in prices has been proved false. Here’s how the director of Iowa State University’s Bioeconomy Institute, Dr. Robert C. Brown, put it in a recent column:
“There is no correlation between world hunger and the amount of U.S. corn available to export. As recent corn-price declines have indicated, there is not even a correlation between the price of food in the supermarket and the price of corn.”
And here’s the lead from a recent Reuters news analysis:
“Heavy demand for corn from ethanol makers was seen as a key driver of corn futures to record highs in June, but since then the sharp decline of corn along with other commodities shows that belief was mistaken.”
Yes, corn prices have fallen dramatically since the summer, with the Renewable Fuels Standard and ethanol tax incentives in place. And oil and gas prices have also plummeted. Yet Kraft, which Rosenfeld claims bases its pricing on input costs (“Our prices will go up and down as the cost of our ingredients goes up and down”), has not reduced prices on its products. If corn prices and oil prices were the cause of food price increases, why haven’t food prices plummeted like corn and oil prices have?
In her interview, Rosenfeld calls for “an administration that is willing to talk about the facts and science as opposed to bending to political pressure to address some of these issues.” Coming from an executive with a Big Food company that has used political pressure and failed, this is laughable. It’s long past time for the media to call her out on this statement and join the chorus of economic experts and others who recognize that food companies are the ones responsible for high food costs – and making record profits doing so.