Submitted by Unregistered user (not verified) on March 1, 2008 - 7:49pm.
I do firmly believe we should not use food crops for anything but food (for a large number of reasons), and that the subsidy on ethanol should be ended, but the current hand-wringing over "food vs. fuels" is as hysterical (and wrong) as any other part of the high-pitched nonsense regarding biofuels.
As I lack the resources to mount a major study on economic forces and their effects, I did the following experiment.
The largest box of cornflakes I could find in the local store was a 20 oz box; that's 1.25 lbs of cornflakes.
I am going to assume that it actually takes two pounds of corn to make one pound of cornflakes. So, for that 20 oz. box, 40 ozs. of corn were used; that's 2.5 pounds of corn. (No slight to the producers of cornflakes here; I am sure they are all very, very good at making cornflakes from corn, but since I have no information on that point, I am making a conservative assumption).
A bushel of corn weighs 56 pounds, so at a price $5.60 per bushel, slightly more than today's trading price, a pound of corn will cost 10 cents. So that 2.5 pounds of corn in the box of cornflakes costs 25 cents total. And that price of $5.60 per bushel (yes, price, not cost) is "all in", and includes what was paid for the fertilizer, farm equipment, fuel, etc. needed to make that bushel of corn.
The 20 oz. box of cornflakes was priced at $3.19, or approximately 13 times the price of the corn, using my above assumptions. So if corn doubles in price, from $5.60 to $11.20 per bushel, and the price of that box of cornflakes is driven entirely by that rise in corn prices, then the price of that box of cornflakes should rise another 25 cents.
This is admittedly a simple experiment that does not address all forces in the cereal foods market, and I cannot claim that is directly related to what is happening in China, Mexico, or the other places noted in the article. However, I do note that my experiment uses real world prices (yes, commodity prices are world prices) that are publicly available, and presumably could be done using other foods as the example.
The price of food is rising, but not due to the increase in grain prices. The fuel and energy used to transport the grain, process it into food, and transport the product to the market are the major sources of the price increase, and are all directly related to the price of oil, not corn. Let's see the spreadsheet included in any further comment on this point.
I do firmly believe we should not use food crops for anything but food (for a large number of reasons), and that the subsidy on ethanol should be ended, but the current hand-wringing over "food vs. fuels" is as hysterical (and wrong) as any other part of the high-pitched nonsense regarding biofuels.
As I lack the resources to mount a major study on economic forces and their effects, I did the following experiment.
The largest box of cornflakes I could find in the local store was a 20 oz box; that's 1.25 lbs of cornflakes.
I am going to assume that it actually takes two pounds of corn to make one pound of cornflakes. So, for that 20 oz. box, 40 ozs. of corn were used; that's 2.5 pounds of corn. (No slight to the producers of cornflakes here; I am sure they are all very, very good at making cornflakes from corn, but since I have no information on that point, I am making a conservative assumption).
A bushel of corn weighs 56 pounds, so at a price $5.60 per bushel, slightly more than today's trading price, a pound of corn will cost 10 cents. So that 2.5 pounds of corn in the box of cornflakes costs 25 cents total. And that price of $5.60 per bushel (yes, price, not cost) is "all in", and includes what was paid for the fertilizer, farm equipment, fuel, etc. needed to make that bushel of corn.
The 20 oz. box of cornflakes was priced at $3.19, or approximately 13 times the price of the corn, using my above assumptions. So if corn doubles in price, from $5.60 to $11.20 per bushel, and the price of that box of cornflakes is driven entirely by that rise in corn prices, then the price of that box of cornflakes should rise another 25 cents.
This is admittedly a simple experiment that does not address all forces in the cereal foods market, and I cannot claim that is directly related to what is happening in China, Mexico, or the other places noted in the article. However, I do note that my experiment uses real world prices (yes, commodity prices are world prices) that are publicly available, and presumably could be done using other foods as the example.
The price of food is rising, but not due to the increase in grain prices. The fuel and energy used to transport the grain, process it into food, and transport the product to the market are the major sources of the price increase, and are all directly related to the price of oil, not corn. Let's see the spreadsheet included in any further comment on this point.