Tuesday, October 23, 2007

to eat or drive, that is the question.

Ethanol demand pushing up cost of staple foods

The Hamilton Spectator

Toronto (Oct 23, 2007)

The cost of everything from tortillas to cereals and corn starch will rise in Canada because America's policy of subsidizing ethanol to cut dependence on foreign oil has led to rising demand for corn, says a report released yesterday.

Corn-based staples like tortillas have become more costly, along with other grains, fruits and vegetables that are pushed aside as farmers cash in on corn, said CIBC World Markets' chief economist Jeff Rubin.

"When you add it all up it's fairly significant because food inflation is already well over 4 per cent and we would expect it to move higher as more and more corn production is diverted to ethanol as is required under President Bush's plan," Rubin added.

U.S. governments provide massive subsidies -- $8 billion last year -- to encourage ethanol producers to expand and corn farmers to supply the crops to help make the fuel. The growing diversion into ethanol has resulted in a 60 per cent rise in corn prices in the past two years, Rubin said. Corn prices are more than $3.60 US a bushel.

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