Don't blame ethanol for pricier popcorn

Tuesday, July 24, 2007

If your popcorn costs a little more when you go see the Simpsons movie, some distributors would like to blame it on the ethanol industry.

That's because while popcorn has always brought a premium, more and more corn acreage has been converted to alcohol production.

Less land devoted to the snack food, plus dry field conditions, translates to tighter supplies which results in higher prices. It's basic economics.

But there's more to it than that.

According to a story by The Associated Press, U.S. farmers harvested about 890 million pounds of popcorn from 214,243 acres in the cornbelt.

Americans eat 17 billion quarts of popcorn a year, about 70 percent of it in the home, according to the Popcorn Board.

We eat most of our popcorn in the fall and continue to enjoy it throughout the winter months, before taking a break in the spring and summer.

The story cited a pair of Ohio brothers who expect to receive at least 13 cents a pound for this year's crop, compared to 9 cents a pound for last year's.

But if the price of your snack goes up next winter, don't think the farmer enjoyed all of the profits. More than likely, the raise went to pay for higher packaging, distribution and transportation costs.

And the transportation costs were pushed up by the higher cost of fuel.

That's exactly the problem the ethanol industry is trying to solve.

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  • First, if oil prices go up dramatically, can one honestly expect ethanol producers to not raise their prices as well? Ethanol prices will track (by staying just slightly below) oil prices, which means transportation costs will still go up even if we switch to 100% ethanol. "It's basic economics."

    Also, you are chalking up higher prices to "higher packaging, distribution and transportation costs" while ignoring the basic principle of supply and demand-less corn to eat means prices go up. While I'm not saying just because this is a fundamental economic principle it has to be true, what evidence do you have that other costs are truly to blame?

    Finally, I know popcorn is a topic many American care about (seeing as we eat lots of it). But the story really is more than that. Higher corn prices means higher meat prices, since livestock producers have pass these costs onto consumers. It also means the 2 billion poorest people in the world are facing even greater prospects of starvation.

    -- Posted by Economist on Thu, Jul 26, 2007, at 1:31 PM
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