Corn ethanol not culprit for food inflation

By Christine Stebbins

CHICAGO (Reuters) - U.S. food inflation is rising but don't blame the ethanol-based boom in corn prices, the head of global agriculture and food-industry research firm Informa Economics said on Monday.

Memphis, Tennessee-based Informa, formerly called Sparks Companies, said a study based on 20 years of price data shows that corn prices have minimal impact on the U.S. Consumer Price Index for food, which has been on the rise.

The study, released on Monday, "debunks the concept that the ethanol expansion is the underlying and main significant reason for food price increases," Bruce Scherr, Informa's chief executive, told Reuters in an interview.

"We're not saying that corn prices are cheap, that ethanol hasn't helped underpin the growth in the corn economy," Scherr said. "What we are saying is to blame corn and corn-based ethanol for all of the inflation associated with food and food prices ... is to grossly under-consider all the other forces at work."

The CPI for food, a broadly used gauge for inflation, is up almost 6 percent for the first nine months of 2007, with the food inflation pace at a 25-year high, industry analysts said.

Many have blamed the rising price of food on raw commodity prices which have soared to multiyear highs in 2007.

Chicago Board of Trade corn futures rose to $4.37-1/4 in February, the highest level in a decade. The catalyst was President George W. Bush's State of the Union speech in January, which called for a more than five-fold expansion of U.S. biofuels like corn-based ethanol to some 35 billion gallons by 2017.

Scherr does not see the upward price trend "to be broken in the near future" given the world's demand for raw commodities. But outlooks for bigger corn yields due to increased seed technology will push world production by 2015 to 2020 to levels that will be better able to keep up with demand, he said.