The RFS and Rising Food Costs

The RFS and Rising Food Costs
Proponents of the Renewable Fuel Standard (RFS) claim that it has no impact on food prices. Small
business owners from America’s chain restaurants know from experience that food costs have
significantly increased throughout the history of the RFS. Research from the United States Department
of Agriculture and Congressional Budget Office clearly show the RFS is causing food costs to rise.
Here are the facts:
 According to the Congressional Budget Office,
 Since 2005, the consumer
the RFS will increase corn prices and thus raise
prices for the wide variety of food produced with
price index for food has
v
corn ranging from corn syrup sweeteners to
risen
28.2%.
i
meat, dairy, and poultry products.
 Livestock, dairy and poultry are impacted by the
 The producer price index
RFS as they compete for feedstock with the
increased by 32.9% from
government supported biofuel industry. Prices
of all proteins have risen drastically since the
2005-2014. vii
implementation of the RFS. For example, the
retail price of beef has risen more than 22% since
2008 – from 432.6 cents per pound in 2008 to 528.9 cents per pound in 2013. ii
 An increase in the price of corn 20 to 40% results in a 2 to 4% increase in prices of corn-based food
products at the retail level.iii
 The United States Department of Agriculture’s Economic Research Service stated that the increase
in the price of corn first affects the price of beef, pork, poultry and dairy, while “the full effects of
the increase in corn prices for packaged and processed foods will likely take 10-12 months to move
through to retail prices.”iv
 Since 2005, the year the RFS was enacted, the consumer price index for food has risen 28.2%
compared with a 20% increase in core inflation during that same time.v
 Since the RFS was most fully implemented in 2008, food price inflation has gone from slightly lower
than general inflation to 60% higher than general inflation.vi
 The producer price index, a gauge of the costs incurred by producers to produce food products,
increased from 2005 – 2014 by 32.9%, indicating that not only are consumers paying more for food,
but those who provide food have had to inadvertently absorb some of those costs due to the
volatility of the RFS.vii
 According to the Congressional Budget Office, if implemented, the heightened 2017 EISA
requirements would increase the amount of total U.S. food expenditures by $3.5 billion, or
about 0.2 percent of the approximate $1.8 trillion in spending on food expected in 2017. viii
The independent research and facts show that the RFS has an unmistakable impact causing food
prices to increase. It is time to repeal this failed government mandate and take the RFS off the menu.
i
Congressional Budget Office, The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions, April 2009, p.6 [insert new title and date of new study]
USDA Economic Research Service, “Choice beef values and spreads and the all-fresh retail value,” Updated July 22, 2014
Committee on Economic and Environmental Impacts of Increasing Biofuels Production, National Research Council, Renewable Fuel Standard, 2011, p. 133
iv
USDA, Economic Research Service, U.S. Drought 2012: Farm and Food Impacts
v
Bureau of Labor Statistics, CPI, U.S. City Average, Food, January 2005 to January 2014
vi
Thomas Elam, The RFS, Fuel and Food Prices, and the Need for Reform, April 18, 2013, p. 8
vii
Bureau of Labor Statistics, PPI, Stage Processing, Finished Consumer Foods, Jan 2005 – Jan 2014
viii
Congressional Budget Office, “The Renewable Fuel Standard: Issues for 2014 and Beyond,” June 2014
ii
iii
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