Food Prices Expected to Rise 7.5%, Ethanol to Blame

From the Christian Science Monitor

The reason people are smarting: Inflation in grocery aisles is up by more in the first six months of 2007 than in all of 2006. That means food costs are on track for the biggest annual percentage hike since 1980, according to the Labor Department. The anticipated 7.5 percent increase would readily outflank the 2.6 percent core inflation rate to date, which excludes food and energy. It's across every grocery aisle, too, from burgers to bagels, from duck to dumpling.

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The chief culprit is corn, namely No. 2 feed corn, the staple of the breadbasket. In answer to President Bush's call for greater oil independence, the amount of feed corn distilled into ethanol is expected to double in the next five to six years. Distillation is already sucking up 18 percent of the total crop. The ethanol gambit, in turn, is sending corn prices to historic levels – topping $4 per bushel earlier this year, and remaining high. All of this trickles down to the boards at the Chicago Mercantile Exchange, affecting the price of everything from sirloin to eggs (which are up, by the way, 18.6 percent across the nation).