With food prices at or near record highs, agriculture ministers from the Group of 20 major economies will be meeting for the first time next week in Paris. Critics say one factor putting pressure on food prices is the use of food crops to produce biofuels like ethanol. U.S. Agriculture Secretary Tom Vilsack Monday said the American ethanol industry plays only a minor role in rising food prices. But he added government support for the industry may be waning.
Secretary Vilsack told a luncheon gathering in Washington not to believe everything one hears about ethanol's role in today's high and volatile food prices. "The truth of the matter is that corn-based ethanol does not deserve the scapegoat reputation that some folks often attempt to assign to it," he said.
Critics, however, point to the fact that 40 percent of the U.S. corn - or maize - crop is now used to produce the biofuel. The industry grew rapidly in the last decade, and many analysts say that is part of the reason why maize supplies are tighter than they have been in 15 years. And those extremely tight supplies push prices up and make them very sensitive to any bumps in the market like bad weather.
Policy analyst Marie Brill at the advocacy group ActionAid wonders whether too much is being asked of farmers. "Are we setting our farmers up to fail by asking them to feed the world and our cars in a changing climate?" Brill asked.
Vilsack says no. He conceded that biofuels played a role the last time food prices rose sharply in 2007 and 2008, but he said it was minor -- only 10 percent of the increase.
And, he added, Americans have been benefiting from the biofuel industry's growth in a number of ways. It is providing jobs and economic opportunities in rural America, where rates of chronic poverty and unemployment are highest. Vilsack said blending ethanol into gasoline has lowered the cost at the pump by about 25 cents a liter. And he said biofuels hold even more promise for the future.
"If we're to meet the president's challenge of reducing our reliance on foreign oil by a third, we're going to need to have a robust biofuel industry,” Vilsack said. “Now, to do that, we're going to have to move away from corn-based ethanol, which we recognize and which we are doing."
Vilsack pointed to government-backed research on biofuels from algae, grasses, and other crops. But critics say none of those crops are viable alternatives to food-based biofuels yet.
In addition to the competition between food and fuel, many critics object to the fact that the ethanol industry gets about $ 6 billion in government subsidies at a time when business is booming and budgets are tight.
ActionAid's Marie Brill says even the industry itself recognizes it can stand on its own. "There's been this growing consensus even within the ethanol industry that the subsidy and the tariff at this point could be removed without having a big impact on the production and use of biofuels," Brill stated.
Tom Vilsack does not disagree. He wants to see the industry grow. "Does that mean continuing subsidies forever? No. But I think we have to be very careful about the way in which we go about reducing those subsidies," he said.
Vilsack wants to see funds redirected to producing gas pumps and cars that are better able to handle ethanol.
But critics say the government should not continue to support food-based biofuels until viable alternatives are developed.