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Grassley: Corn prices down by half, so why aren't groceries budging?

Thursday, November 13, 2008

Corn prices have declined to about half their summertime highs, but food prices at the grocery store have hardly budged, some Iowa officials are noting. Currently retail grocery prices are nearly 8% above last year. At the same time, some top food companies have reported record profits despite a shaky U.S. economy.

Meanwhile, the Grocery Manufacturers Association (GMA) continues to blame corn use in ethanol for consumers' higher food bills. It doesn't add up, and farmers and government officials are asking for explanations.

Iowa Senator Charles Grassley recently challenged GMA CEO C. Manly Molpus on the issue, asking when GMA's member companies will "reduce food prices commensurate with lower input costs." Grassley reminded Molpus that GMA and some of its leading corporate members blamed high corn prices for higher food prices for much of this year, yet now that corn prices are half what they were then, food prices have remained high.

"Corn was attacked as the cause for higher food prices and Iowa corn producers worked to educate consumers with the truth. And, consumers should understand that now more than ever since the drop in corn prices hasn't changed their grocery bill, " said Darrel McAlexander, chair of the Iowa Corn Promotion Board. "Corn growers are doing everything we can to provide a safe and abundant food supply as well as corn-based ethanol fuel."

According to a Merrill Lynch study, corn ethanol saved consumers 15% or up to 45 cents per gallon. Throughout the year, a variety of economic studies have confirmed energy, transportation and labor costs as the significant drivers behind higher food prices. For example, the average food product travels 1,500 miles to get to the store shelf. One semi-load of corn flakes requires less than 47 bushels of corn, valued at $165 at current prices. Yet in the store, that load sells for $10,100 or more.

In January, 2008, the Iowa Corn Growers Association and the Iowa Corn Promotion Board launched a consumer education campaign about food and fuel called Kernels of Truth. The Kernels of Truth facts about the amount of corn in food products can be found at www.iowacorn.org.



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