(Page 2 of 2)
Reason: You also point the finger at an aspect of American energy policy in hurting the world's hungry: our ethanol subsidies.
Kilman: The ethanol program creates a subsidy for demand on corn, which has a ripple effect on other crops. Farmers plant more corn, and plant less of something else. And what's happened, I think unintentionally, is by creating a mandate for ethanol you tied the price of corn and indirectly the cost of a bunch of our food to the cost of oil.
Now one third of America's biggest crop is used to make fuel, and that's happened very rapidly. If you look at the price of corn today, it's at a new plateau. Corn in the ‘90s and first half of this decade was usually $2 a bushel. Now a few weeks ago it was $4 a bushel, and now around $3.50, but it's settling at a higher plateau. Soybeans have also settled at higher prices which means it's more expensive to keep buying the same amount for food aid programs.
I was in Africa in 2007 when the price of corn first started going up. You are seeing food riots in the developing world, but I think it's complicated. That run up in corn filters through other commodities, and what happens with the ethanol program and biofuel mandates is they have fed into a general environment where traders are willing to bid up prices. But in addition to ethanol, the developing middle class in emerging nations are eating better, want to eat more meat, and you need more grain to produce more meat.
There were many things going on in world food markets, I hate the cliché of "perfect storm" but it fits—a lot of bad things were coming together, and one was ethanol. I don't blame ethanol solely for food riots. But demand for grain started rising faster than our ability to produce grain in this decade, and ethanol biofuels was one of the reasons.