No quick resolution to food versus fuel debate

ST. LOUIS, Sept 19 (Reuters) – The government mandate for a much more aggressive U.S. policy to produce crop-based fuels is less than a year old but it has spurred one of the biggest battles within the agricultural industry in decades.

The mandate, included in a landmark energy law signed in late 2007, set off a record run in prices of corn and soybeans, the main crops used for bio-based fuels like ethanol. Farmers, and their bankers, applauded, as demand exploded.

But that huge new crop demand from energy refiners also has choked off profits of food producers from cereal makers to vegoil producers to the livestock growers, dairy farmers and fish farms faced with soaring feed prices.

Food raw material prices have risen at rates that have alarmed economists, including the U.S. Federal Reserve and other policymakers. In August, wholesale food prices were 9 percent above a year ago — the biggest jump since 1981.

The critics all cite the same reason: the biofuels “craze” as a wrong-headed, shortsighted policy that has to change. That view had ample play on Friday at a round-table discussion of experts at the annual Soyatech soybean industry conference.

Guardian