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February 15, 2007

Ethanol and food prices

Gas alternatives, such as ethanol, are seen as major energy sources for the future. But, as N.C. State University economist Mike Walden points out, there are downsides.

"Well, economics is called the dismal science … and I think in this case you can see why," says Dr. Walden, a North Carolina Cooperative Extension specialist.

"Economists are really trained to look beyond the first effects to secondary effects, and one concern here is that we have had a, of course, dramatic increase in the use of ethanol," he says. "People are being encouraged to use ethanol.

"Now ethanol is a corn-based fuel, so what we have seen happen is a dramatic increase in the demand [for], or use of, corn. And as economists would predict, corn prices have risen to quite lofty levels," he adds. "Now this could not only affect the profitability in the future of producing ethanol, but it also could have an impact on the price of food, including meat. And we could see those food prices jump.

"So the concern here ... -- and something I think we will have to address -- is that some of our fuel cost savings potentially by using ethanol down the road could be offset by the increases in the price of food."

Posted by deeshore at February 15, 2007 10:31 AM