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Myths and realities behind rising food prices

Wednesday, January 21, 2009

A lot of discussion these days includes alternative energy and the sources for the energy. The idea is to move away from fossil fuels to improve the environment.

One of the sources of energy that we are hearing about is wind power. It sounds good and can help to provide energy. However, it will prove to have limitations and will not be the entire answer. One expert says that at the most we cannot expect more than 10 to 15 percent of our energy coming from windmills. Granted, this is a lot and will be helpful.

But it is not an entirely dependable source. When the wind does not blow, no energy is produced. The wind speed can change rapidly and that will have an affect on the distribution of energy. It also has some environmental issues.

One of the mysteries of recent months has been the high price we were paying for gasoline a few months ago -- why did gasoline get as high as it did? Just as mysterious is the much lower price that is being paid for oil at the present time. Why did it drop so much?

Along with the high cost of energy that we have experienced is the high prices that we are paying for food. Much of this was supposedly blamed on the high cost of energy and transportation. Fuel prices have gone down and we do not see any decrease in the price of groceries.

Recently, an Army buddy and early extension co-worker, Phil Reeter who lives in Iowa, called me and during our conversation he suggested that there was a good article in the July issue of the American Soybean Association publication that gives many facts about the truth behind the rising food prices. Much of the blame for the increase in food prices has been aimed at biofuels made from corn and biodiesel made from soybeans. The article points out that this is not the real fact.

Phil suggested that I read this article. The other day I was out at Prairie Pride and saw that they had reprints of this article, and I picked up a copy. I realize that it is printed by a soybean organization, but it still presents facts and information that the public needs to know. This is especially true for those of us in rural America and particularly with a biodiesel plant in our area.

"Myths and Realities Behind Rising Food Prices" discusses the facts about the relationship between biodiesel and the consumption and availability of soybeans, soybean meal and soybean oil; the environmental and health benefits of biodiesel and the roles of biodiesel and biotechnology on U.S. soybean supplies.

It says that the claim of the high cost of agricultural products and the use of farm products for biofuels depriving people of food are strongly disputed by well informed people. According to the U.S. Department of Agriculture, Economic Research Service biofuels have played a relatively small role in rising food prices. Larger contributors include the explosive growth in fuel cost, growing demand for food and livestock feed from an increasingly prosperous middle class in other countries, as well as, weather patterns.

Biofuels and biodiesel have made a contribution to the world's fuel supply, helping to keep the fuel prices lower. These fuels have cut the consumption of crude oil by 1 million barrels per day, creating a $43 billion savings. These fuels are also contributing to improving the air quality in the cities.

As the demand for soy biodiesel increases, the amount of soy protein will also increase. Soybean meal is primarily used for poultry and livestock feed. Processed soybeans contains 80 percent rich soybean meal and 18 percent crude soybean oil. Much of the soybean oil is used for edible consumption (cooking oil, salad oil, margarine) and for industrial uses which includes adhesives, lubricants, solvents, etc., and biodiesel.

The article points out that only 5 percent of total world soybean oil production was used for U.S. biodiesel production in 2007 which does not cause any food shortages. Traditionally soybean oil has accounted for about 80 percent of all of the edible fats and oils consumed in the U.S.

Using facts from the U.S. Department of Agriculture the article says that cereals and bakery products account for 7.4 percent of all food costs. Fats and oils, including soybean oil that is used for both food and to make biodiesel, account for only 1.5 percent of all food cost.

The farm value share of expenditures is only 19 percent. It is only about 6 percent of retail cost for cereals and bakery products. For fats and oils, the cost of commodities account for about 17 percent. The other major costs are labor, transportation and marketing.

There are renewable energy benefits of biodiesel and also environmental benefits of biodiesel. According to the American Soybean Association continued biofuels investments are essential for the increased demands of the products derived from the processing of soybeans. It will have an impact on the world hunger.

This American Soybean Association copyrighted special article is well worth reading to gain knowledge of the importance of the biodiesel industry. For more information about the association, visit www.SoyGrowers.com .

Leonard Ernsbarger
Leonard At Large