The higher grocery bills you’re paying certainly come from post-COVID inflation. But, it’s years of government overreach into biofuels that’s increasing the food prices by eschewing the fuel markets and the cost of key grains.
Biofuel and Food Prices
Biofuels are liquid fuel sources derived from biomass materials ranging from starchy crops to algae and wood bark. The “first generation” of biofuels includes products such as ethanol made from traditional crops like corn, potatoes, wheat, sugar, and soy. Biofuels have become a hot topic because they produce less emissions than traditional fossil fuels and could be a renewable source of energy.
Biofuel incentives and mandates distort the economy and move more corn, soy, and wheat production toward an ineffective fuel source. Whereas traditionally those acres would have gone towards the dinner tables of families struggling to pay their bills. This happens for two reasons. For one, there are less crops to go from the field to the table because they’re going to biofuel production. This decrease in food supply combined with the increased demand for the same crops from biofuel promotion causes the existing crops to become even more valuable and thus expensive.
A 2022 report from the National Research Council found that between 2007 to 2009, there was a 20 to 40% increase in corn prices due to biofuels. A 2013 study projected the effect of biofuels on corn prices in 2015 from anywhere from 5 to 53%.
Currently, 46% of all soybean oil and 45% of all corn produced in the US goes to make renewable fuel. However, if all corn and soybeans in the US were dedicated to only biofuels, then it would only meet 12% of the demand for gasoline. Some distillers’ grains are produced from the ethanol production process that can be used to feed animals and thus make more room for food to go to people. There are some complexities with the exact percentages here, but still, a large swath of traditional food production is now being siphoned away for a different cause.
The point here is less about the individual merits of biofuel, but more about the tradeoff: devoting almost half of all corn and soy production to something around 5 or 6% of the gasoline demand isn’t worth the price increases on food that is punishing families. In 2022 alone, food prices nationwide increased by 9.9% and is predicted to increase by another 5.8% through 2023.
Ethanol in Kansas
In a recent publication by the John Locke Foundation, a think tank similar to KPI in North Carolina, analyzing biofuel policies across the country, Kansas earned an F for its eleven incentives and mandates. Kansas’s policies included varied tax credits for alternative fuel vehicles and infrastructure, tax incentives for retailers, a lower tax rate on E85 motor vehicle fuel, and a requirement that government vehicles run on biofuel diesel.
On the surface, this is bad tax policy because of its narrow cut-outs that only benefit one part of the economy at the expense of others. Credits like these get passed through the Kansas legislature every year, and while small individually, become a glut of specialized tax cuts that only oftentimes overlap with other policies.
Kansas farmers should be able to do as they please with their crops: if they want to sell their product to biofuel producers, then they should be able to. The problem is when government begins picking winners and losers with policy and the consequences like rising food prices are the consequence.
Biofuels aren’t the only area in agriculture policy where regulation stifles business. Kansas Justice Institute successfully petitioned the government in 2019 on behalf of two farmers in Pfeifer who were prohibited from posting flyers or advertising sales online to sell raw milk. State-inspected meat facilities can only sell meat within the state they operate in, while federal facilities can send meat across state lines – this created cost issues during COVID-19 when many plants closed down and farmers couldn’t send their meat elsewhere to process or sell. This issue has evolved into the federal PRIME Act that would allow states to create their own laws and regulations regarding meat that is slaughtered, processed, and sold across statelines.
Food is only going to become a larger and larger issue as the world’s population increases and land use and the environment continue to be major issues. The government failed to pass the Farm Bill by the end of September, which has ceased operations for SNAP benefits and crop insurance amongst many, many other programs in the bill. That means government needs to see what consequences its uncompetitive policies are creating and remedy them.