RFA responds to FAO news that global food prices fell in 2016

By Erin Voegele | January 16, 2017

On Dec. 12, the Food and Agriculture Organization of the United Nations announced that prices of major global food commodities dropped 1.5 percent from 2015 to 2016. The Renewable Fuels Association noted the FAO’s news demonstrates corn ethanol has not driven up food prices.

The FOA Food Price Index averaged 161.6 points in 2016, down 1.5 percent when compared to 2015 and representing the fifth consecutive decline. Although the prices of sugar and vegetable oils increased significantly last year, the FOA said the cereal, meat and dairy markets kept the index below its 2015 average.

The FOA Cereal Price Index averaged approximately 147 points in 2016, down 9.6 percent when compared to 2015 and as much as 39 percent lower than its peak in 2011. The FAO Vegetable Oil Price Index averaged nearly 164 points last year, up 11.4 percent from 2015 but well below the values recorded during the previous five years. The FOA Dairy Price Index for 2016 was 4 percent lower than 2015. The FOA Meat Price Index for 2016 was 7 percent lower than 2015. Finally, the FOA Sugar Price Index averaged 255.9 points last year, 34.2 percent higher than in 2015. The FOA said it was the first yearly rise in the sugar index since reaching a peak of 369 points in 2011. The sharp increase last year primarily reflects tighter supplies in Brazil, India and Thailand.

The RFA issued a statement in response to the FAO’s news, stressing its data clearly shows corn ethanol has not driven up food prices. “In 2016, the U.S. ethanol industry reached both record production and exports, and according to U.S. Department of Agriculture data issued this week, the final 2016 corn harvest is estimated at 15.1 billion bushels—11 percent higher than 2015,” said Bob Dinneen, president and CEO of the RFA. “The FAO news clearly demonstrates that increased ethanol and corn production has not driven up food prices.

“The FAO news echoes findings of an analysis the RFA commissioned in November 2016, which found that retail food prices were not impacted in any demonstrable way by expansion of U.S. grain ethanol production under the renewable fuel standard (RFS) over the past decade,” Dinneen continued. “The analysis showed that growth in food prices slowed considerably after passage of the RFS, with prices for groceries advancing at roughly half the rate seen prior to the program’s adoption. Meantime, the ethanol industry only uses the starch of the corn kernel, and one-third of every bushel of grain used to make ethanol is enhanced and used as animal feed around the world.”

“On a net basis, the U.S. ethanol industry will use just 2.95 percent of global grain supplies—a six-year low,” he said. “More grain is available for both food and feed use worldwide today than ever before. Additionally, only 17 cents of every dollar spent on food pays for the raw farm ingredients in the food item. The other 83 cents pay for processing, transportation, labor, packaging, advertising and other costs.

“As yet another analysis has found, it’s time to put an end to the demonstrably false ‘food vs fuel’ myth that our opponents inexplicably continue to pass off as fact,” Dinneen said. “There is more than enough corn to both feed and fuel the world.”