Even More Ethanol Dominoes

From TimesOnline--more on the trickle down effects of U.S. ethanol policies:

What’s the connection between ethanol, the biofuel produced from corn, and a cherry vanilla ice-cream?

Answer: the first is responsible for pushing up the price of the other.

This month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol.

Christina Seid, whose family have been making ice-cream at the Chinatown Ice Cream Factory for 28 years, said yesterday that she expected to have to raise her prices, along with all competitors in the short term. “We are holding out as long as we can, but prices will rise,” Ms Seid said.

Comments

[odograph]

I stopped in a Smart & Final, a local ... well not exactly a big box or club store ... more like a restaurant supply store that opened their doors to retail.

When I bake a lot of bread I buy a 25# bag of high gluten flour. Over the last 5 years 've been getting them for between $4.75 and $5.25

I noticed yesterday that they are $6.99, wow. That's a big jump in just a couple years. Call it 5 -> 7, a 40% jump?

FWIW, 25# of corn meal was $10. I believe that corn meal has a little less nutrition pound-for-pound relative to wheat flour. It's an interesting turn of events.

Excellent stuff for economics instruction, no doubt.

[Pablo H.]

Forgive me in advance if you have already written about this, but this piece in Foreign Affairs touches many of the same issues:

How Biofuels Could Starve The Poor, http://www.foreignaffairs.org/20070501faessay86305/c-ford-runge-benjamin-senauer/how-biofuels-could-starve-the-poor.html

"The prices of oilseeds, including soybeans, rapeseeds, and sunflower seeds, are projected to rise by 26 percent by 2010 and 76 percent by 2020, and wheat prices by 11 percent by 2010 and 30 percent by 2020. In the poorest parts of sub-Saharan Africa, Asia, and Latin America, where cassava is a staple, its price is expected to increase by 33 percent by 2010 and 135 percent by 2020. The projected price increases may be mitigated if crop yields increase substantially or ethanol production based on other raw materials (such as trees and grasses) becomes commercially viable. But unless biofuel policies change significantly, neither development is likely."