REUTERS: USDA HEAD DOWNPLAYS CALLS TO CUT BIOFUEL MANDATE

By Christopher Doering

May 19, 2008

WASHINGTON (Reuters) - Agriculture Secretary Ed Schafer said ethanol is not having a “major” impact on food prices, and downplayed calls by lawmakers and industry groups to make changes to programs that promote increased use of biofuels.

Prices for wheat, corn, soybeans and rice have set record highs at the Chicago Board of Trade this year. Around the world, rising food prices have lead to hoarding of wheat and rice, bread lines and food riots.

It has prompted demands from some to pull back the throttle on the boom in ethanol and other biofuels, touted as a home-grown way to reduce U.S. reliance on foreign energy.

In Congress, two dozen Republican senators have pushed to revisit a mandate passed last December that calls for a fivefold increase in biofuels output by 2022.

Schafer told reporters that demand for biofuels is having an impact on food prices, “but it is not a major factor.”

He said there would be few benefits from changing the renewable fuels standard, reducing the tax credit for producing ethanol as proposed in the farm bill or ending the ethanol import tariff.

“The change in the renewable fuel standard, the change in tariff or duty isn’t going to affect food prices,” said Schafer. “We need to focus on things that will actually have an effect instead of a short-term political solution.”

The Grocery Manufacturers Association, echoing concern in the food industry and from aid groups, earlier this month blasted the growing use of corn to make fuel that is driving up the cost of virtually all commodities.

“It’s clear that American families are facing unbearable pressure — pressure that Congress can help relieve by revisiting and revising the mandated diversion of corn to ethanol production,” said GMA spokesman Scott Faber in a statement.

The Bush administration estimated 3 percent of the more than 40 percent increase in world food prices last year is due to demand for corn for ethanol use. Early this month, USDA estimated about a third of this year’s projected 12.1 billion-bushel corn crop will go toward ethanol production in 2008/09, up from about 25 percent in 2007.

Farm and biofuel groups and USDA say factors other than ethanol are primarily to blame for higher food costs, including high oil prices, increased global food demand and a drop in grain production because of drought in parts of the world.

“The policy choices we have made on biofuels will deliver long-term benefits, but we also have to recognize that there may be some short-term costs or dislocations involved,” said Schafer.

USDA chief economist Joe Glauber said food prices would rise by 5 percent this year, the highest rate since 5.8 percent in 1990, as retailers pass higher energy and commodity prices to consumers.

Food prices usually rise by modest amounts, roughly 2.5 percent and below the overall U.S. inflation rate. Prices rose by 4 percent in 2007.

DES MOINES REGISTER: AG CHIEF ACCUSES FOOD MAKERS OF UNFAIR ATTACK ON ETHANOL
By Philip Brasher
May 19, 2008

Washington, D.C. - Agriculture Secretary Ed Schafer accused food makers of running an underground campaign to unfairly blame ethanol for rising grocery costs.

“Clearly, we have a difference of opinion with the” Grocery Manufacturers Association, Schafer said today.

That organization, which represents such household names as Coca-Cola, Kellogg, Kraft and General Mills, hired a public relations firm operated by former Clinton administration associates to win support for freezing or rolling back a newly enacted mandate for ethanol usage.

Sen. Charles Grassley, R-Iowa, last week posted documents related to the public relations effort on his Web site.

“Underground things that have been going on for several weeks to generate the public opinion that some of these things (biofuel incentives) ought to be changed,” Schafer said.

Officials from GMA did not immediately respond to requests for comment.

President Bush’s chief economic adviser, Edward Lazear, told a senate committee last week that while global food costs have risen 43 percent over the past year, production of corn-based ethanol only accounts for about 3 percent of that increase.

While biofuel production has “some effect on prices, it’s not a major effect. It’s not even a big effect,” Schafer said.

NATIONAL JOURNAL/CONGRESS DAILY: SCHAFER - ETHANOL NOT TO BLAME FOR SURGING FOOD PRICES

By Jerry Hagstrom

May 19, 2008

 Agriculture Secretary Schafer today vigorously defended U.S. ethanol producers against charges that they play a major role in increasing domestic and international food prices. Referring to the debate of food versus fuel, Schafer said, “We are going to make the case for food and fuel. It is time for USDA to join in the public conversation.” Schafer cited the Council of Economic Advisers to argue that the total global increase in corn-based ethanol production has not lifted food prices worldwide by more than 3 percent. Schafer added there has been an “underground” campaign against ethanol — a reference to revelations last week that the Grocery Manufacturers Association had hired the Glover Park Group to run an aggressive campaign to roll back ethanol mandates. After World Bank and international aid officials made statements blaming ethanol for the increase in food prices, “We spent several weeks trying to say ‘Where is this stuff coming from?’ ” Schafer said.

 Rather than ethanol, said Schafer, increased demand in other countries, combined with drought in Australia and higher fuel prices, has pushed food prices upward. He cited higher fuel prices as especially critical because the cost of energy affects transportation and distribution costs. At current oil prices, he argued, ethanol reduces the cost of energy. Schafer said the appropriate short-run response is the increase in food aid that President Bush has proposed, while an effective long-run response would use biotechnology and improved farming methods to increase yields. Schafer said he would defend ethanol at a U.N. Food and Agriculture Organization food security conference in Rome June 3-5.

 Referring to a recent letter that 24 Republican senators, including presumptive Republican presidential nominee Sen. John McCain of Arizona, sent in early May asking environmental regulators to reconsider the corn-based ethanol mandate, Schafer said, “I have no sympathy for 24, 48 or 50 senators who signed it who are not seeing the facts.” Senate Finance ranking member Charles Grassley criticized the anti-ethanol campaign on the Senate floor last week. “The Grocery Manufacturers Association … needs an excuse to gouge consumers of America with higher food prices, and an easy scapegoat for increasing food prices is, of course, ethanol,” said Grassley. Schafer declined today to say when Bush will veto the farm bill after he receives it, likely to be this week, but said he expects “the answer will come swiftly.” Schafer also strongly refuted a comment by Senate Agriculture Chairman Tom Harkin that Bush may not in fact veto the bill in the end. Meanwhile, Harkin spokeswoman Kate Cyrul called Schafer’s remarks today “reminiscent of … musical chairs. Congress has taken its seat by passing a strong, bipartisan bill by overwhelming majorities. But with the White House holding the line on a veto threat, it seems the music has stopped and they are the only ones left standing.”