Food Versus Food Fallacies

FOOD VS. FUEL FALLACIES

Three years ago, global food companies waged a deep-pocketed smear campaign
against American ethanol. At the heart of their propaganda was the claim that
ethanol was to blame for higher food prices (see news story from Roll Call at
GrowthEnergy.org/reports)
Since then, a series of credible government and academic studies have proven that ethanol’s use of grain has, at best, a minimal
impact on grocery prices. Because of oil’s influence over the cost of packaging, marketing and transportation, the greatest driver
of grocery prices is oil. When oil prices go up, so do grocery bills.
But, as this report by Growth Energy found, the profits of grocery manufacturers went up along with those checkout counter
tallies. Specifically, record profits were seen by members of two major industry groups — the Grocery Manufacturers Association
(GMA) and the American Meat Institute (AMI).
What lawmakers, the press and the public deserve to know is that these companies are raking in record profits at the same time
they are perpetuating the Big Lie that ethanol increases grocery store prices. It is time to set the record straight.

BIG LIE: Ethanol is driving up costs for food companies.
AMI President and CEO J. Patrick Boyle released a statement
on Mar. 9, 2011 claiming that the cost of feeding livestock had
increased to the point where it was “[driving] up the cost of
food production for everyone in the supply chain, trickling
down to the consumer.”
TRUTH CHECK:
One day after the AMI statement, Smithfield, the world’s largest
producer and processor of pork, reported record gross
income for the latest quarter bringing in $457.2 million.
BIG LIE: Food costs are rising because of ethanol. Tyson
Foods, Inc. Chairman John Tyson was quoted in a March 10,
2011 Dow Jones news story saying there’s “no doubt” that
food costs are rising because of ethanol.
TRUTH CHECK: When comparing the first quarter of 2011 with
the same quarter last year, gross profit at Tyson Foods increased
40 percent. For the company’s fiscal year that ended Oct. 2, the
company reported a record 109 percent increase in gross profits.
BIG LIE: Ethanol increases livestock feed costs, resulting in
higher grocery store prices. On March 25, 2010, the Grocery
Manufacturers Association, which represents food giants such
as Kraft, General Mills, Coca-Cola and Smithfield, co-sponsored
a full-page ad in beltway publication, The Hill, in which they said
using higher blends of ethanol would “[increase] the cost of
feeding livestock and poultry and the cost of making food.”
TRUTH CHECK: The cost of raw materials accounts for a fraction
of the cost of most consumer goods, and processing, packaging
and transportation make up a larger share of the price on the
tag. Even the Chief Financial Officer of General Mills, in a story for
the Sept. 9, 2009 edition of the St. Paul Pioneer Press covering
his company’s high profits, said that the public doesn’t understand
how small a portion grain costs represent in their overall
expenses — as little as “5 to 10 percent of our input (costs).”
Soaring Profits
Gross profits at Smithfield over the past year
100
200
300
400
31-Jan-10 2-May-10 1-Aug-10 31-Oct-10 30-Jan-11
SOURCE: SMITHFIELD FOODS, YAHOO! FINANCE
$457.2 Million
$178.9 Million
GrowthEnergy.org
FOOD VS. FUEL FALLACIES
FALLACY: Ethanol drives up grocery prices and is responsible
for high commodity prices.
FACT: Academic, government and third party research papers
— including the most recent World Bank study and Oak Ridge
National Laboratory report — all point to other factors, besides
ethanol, as the major drivers of increasing commodity prices
and grocery store bills, including rampant Wall Street speculators,
high oil prices and the high costs of manufacturing,
packaging and transporting. With the price of a gallon of gas
nearing $4, it is no wonder that Americans are starting to see
prices rise on every day expenses, including groceries, clothing
and personal items.
FALLACY: Ethanol production diverts corn that would otherwise
be used to feed the hungry.
FACT: What most Americans don’t know is that approximately
1 percent of all corn grown in this country is directly consumed
by humans. The rest is No. 2 yellow field corn, which is
indigestible to humans and goes to feeding livestock. In fact, a
co-product of ethanol production is the high-protein distiller’s
grain that is used as a livestock feed; approximately a third
of every bushel of grain that goes into ethanol is returned in
highly-sought animal feed, replacing a greater volume of field
corn and saving livestock producers money.
FALLACY: Farmers cannot produce enough corn for food
and fuel.
FACT: American corn growers have demonstrated they have
more than enough capacity to satisfy all demand for livestock
feed, exports and ethanol. In fact, the United States corn
growers were capably producing 11-13 billion bushels of corn