Food and Fuel

THE TRUTH ON FOOD AND FUEL

Virginia's farmers produce necessary crop to meet the needs of all markets: food, livestock and poultry feed, exports and ethanol.

Utilizing renewable sources to lessen the dependence on oil is necessary for energy security. Virginia's grain producers will continue to work to provide food and fuel needs for Virginia and for the United States

Something to think about:

Food prices are largely determined by costs and profits after commodities leave the farm. On average, only about 19 percent of the price of food can be attributed to ingredients. Marketing and transportation
costs make up a much higher portion of total costs.

The Center for Agricultural and Rural Development researchers have estimated that across all foods consumed, 30 percent higher corn prices would increase all average food prices by just 1.1 percent.

In the United States, consumers spend a relatively small amount of their disposable incomes on food-about 10 percent in 2005. (Note: Americans are eating out more than in past years. This can be attributed to the changing structure of the U.S. family, including more women entering the labor force, and driven by changes in demand for food driven by income growth.)

Canadians today spend on average of about 14 percent of their disposable incomes on food compared to Mexicans who spend 26 percent.

Rapid productivity growth on the farm and along the food chain has caused food prices to rise more slowly than incomes. In the early 1950s, U.S. consumers spent about 20 percent on their disposable income on food.

About 50 percent of the corn crop is used for animal feed. Corn makes up a relatively large share of the product prices of eggs, pork, and poultry. Beef and dairy products also contain significant amounts of corn, but the prices of processed foods are largely determined by the cost of other components.

Corn prices are not to blame for the high milk prices at the grocery store. International demand for dairy products has outstripped international supply. Moreover, the world demand for dairy products has put
U.S. products onto world markets, thereby raising prices.

Agriculture is playing a large role in the supply of U.S. fuel. That will help offset any increase in food prices with lower fuel costs and cleaner, less-polluting renewable fuels. Moreover, government payments to farmers in 2007 will be reduced by $6 billion, as a result of higher crop prices.

Fact Sheets and Resource Information:

The Effects of Ethanol on Texas Food and Feed

Corn's Impact on Retail Food Prices: The Five Truths

Food, Price, Inflation- Report by the Kansas City Federal Reserve

NCGA: U.S. Corn Growers Producers Food and Fuel

Get the Facts on Ethanol and Food