Growth Energy strikes back at GMA | TSLN.com

Growth Energy strikes back at GMA

Todd Neeley
DTN Staff Reporter

DTN file photoWhile the Grocery Manufacturers Association has blamed ethanol for the rise in food prices, numerous studies have pointed to a number of other factors driving up food prices, including the rising price of crude oil and weather-related crop disasters across the world, according to ethanol supporters.

OMAHA (DTN) – Growth Energy, a new coalition of ethanol producers and other agriculture groups, has launched an advertising campaign challenging the Grocery Manufacturers Association to explain why food prices continue to rise despite a dramatic drop in corn price and calling for a cut in food prices.

This campaign, announced Tuesday at a press conference at the National Press Club in Washington, D.C., comes as a counter punch to GMA’s attempt last summer to blame expanded ethanol production for spiking food prices. The advertising blitz was aimed at convincing federal officials to do away with the Renewable Fuel Standard.

Last summer the price of corn reached as high as $8 on the futures market, while as of Monday, prices hovered around $3.80. Though the clamor of the food-versus-fuel debate has died down some as corn prices have fallen, representatives of Growth Energy said the GMA and the national media have left many questions unanswered.

“I think we need to set the record straight,” said Tom Buis, president of the National Farmers Union. “I’ve yet to see a story that says ‘oops, that wasn’t the case.’ I think the media owes the public an explanation to why that is.”

Jeff Broin, chief executive officer of Sioux Falls, S.D.-based Poet, the nation’s largest ethanol producer, said that while the GMA was “attacking” ethanol, numerous studies pointed to a number of other factors driving up food prices, including the rising price of crude oil and weather-related crop disasters across the world. Yet, Broin added, the GMA campaign focused on ethanol as the sole cause of higher food prices.

“We predicted this would happen,” Broin said. “Now it has. This is the perfect time to bring this up. This proves there is no correlation with corn and the price of food.”

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Scott W. Openshaw, communications director for GMA, said in an e-mail that the evidence still points to expanded ethanol production as the reason for higher food prices.

“Commodity prices rose dramatically between 2005 and 2008,” he wrote. “Even after recent declines, farm-level corn and soybean prices have more than doubled since 2005/2006. For example, current corn prices remain near $4 a bushel — roughly twice as high as corn prices in October 2005. Retail food costs continue to reflect record commodity prices, reflecting the significantly higher commodity prices food manufacturers paid between 2005 and 2008.”

Openshaw said the GMA still is pushing for the federal government to eliminate subsidies to the ethanol industry.

“The corn ethanol industry has been propped up by the American taxpayer since 1978,” he said in an e-mail. “Thirty years later, the corn ethanol industry is the recipient of nearly $5 billion per year in taxpayer subsidies. We encourage Congress to work in the coming year to begin phasing out these subsidies as currently structured. Ending subsidies for corn ethanol as they now stand will speed our nation’s transition toward energy solutions that do not pit our need for fuel against our need for affordable food and environmental protection.”

Growth Energy members consist of a number of ethanol companies and other agriculture groups, including Poet, the National Corn Growers Association, Amaizing Energy, ethanol plant developer ICM, Green Plains Renewable Energy, Hawkeye Renewables and Western Plains Energy. (http://www.growthenergy.org)

Growth Energy’s ad campaign started with an ad placed in Roll Call magazine Monday and will be followed by another in the New York Times.

Dave Vander Griend, chief executive officer of ethanol plant developer ICM based in Kansas, said GMA has been “misleading America.”

“The assertion by critics that ethanol production is the root cause of high food prices has been proven false,” Vander Griend said. “Corn and commodities prices are significantly lower now, so according to GMA’s argument, if biofuels were forcing food prices up previously, the lower cost of corn should have already brought food prices back down.

“All indicators show that the cost of food will remain high in the months to come, proving big food’s argument is fundamentally flawed. Our current low-priced corn, high-priced food economic situation shows that the experts were right — biofuels production does not lead to increased food costs.”

The cost of food at grocery stores has increased by nearly 8 percent in the past year, according to the U.S. Bureau of Labor Statistics. According to the Consumer Federation of America, milk and cheese prices have increased by about 13 percent, eggs by about 30 percent and bread by nearly 15 percent, from March 2007 to March 2008.

At the same time, major food companies are reporting profits.

According to an Oct. 31 story in the Wall Street Journal, Kraft’s revenue increased 19 percent from the year-earlier period. Kraft’s net income for the third quarter was $1.4 billion — or 93 cents a share — up from $596 million, or 38 cents, a year earlier.

“This raises the question,” Vander Griend said, “when will big food cut their prices? The food-versus-fuel debate was nothing more than a sham cooked up by the food industry.”

The tone of the food-versus-fuel debate was set by the GMA and outlined by a March 3, 2008, proposal from the Washington, D.C., public relations firm Glover Park Group.

“First, we must obliterate whatever intellectual justification might still exist for corn-based ethanol among policy elites,” the Glover Park Group proposal said. “Pivoting off of the recent environmental studies and increasing evidence of rising food prices, we need to make the substantive case about the urgent need to rethink existing ethanol mandates.

“Second, we must demonstrate to policy makers at the state and federal level that there is a political price to allowing ethanol policy to drive up the cost of food. Working with a broad coalition of partners with access to large and diverse memberships, we need to spark real demonstrations of popular discontent with increasing food prices,” the proposal indicated.

Broin said the creation of Growth Energy does not mean ethanol producers are unhappy with the representation they receive from the Renewable Fuels Association or other industry organizations.

“As a group, we believe the more associations, the better,” he said. “We want to have a fresh, aggressive voice in the industry.”

Even the American Bakers Association, one of the 25 groups that announced in June it was on board with the GMA’s campaign, is now hoping to work with the same industry it vilified a short time ago.

During a Food and Fuel Forum hosted by the Agricultural Business Council of Kansas City Oct. 23 in Kansas City, Mo., ABA President and Chief Executive Officer Robb MacKie displayed a much different tone than what came from the GMA campaign last summer.

“It’s time to tone down the rhetoric,” MacKie said. “It’s time to see how we can work together.”

Despite the new tone, he said his association still would like to see the federal government “ease” the current RFS that calls for 10.5 billion gallons of ethanol production in 2009. He added that the ABA would like to see at least some of the 39 million acres in the Conservation Reserve Program released early to bring more land into production.

The ABA continues to support the elimination of the 54-cent ethanol tariff on ethanol imports, he said, to allow more foreign ethanol into the U.S. to help ease the pressure on U.S. corn supplies used to produce ethanol.

todd neeley can be reached at todd.neeley@dtn.com