03 February 2011 23:10 [Source: ICIS news]
WASHINGTON (ICIS)--US federal subsidies for corn ethanol may in part be responsible for the uprising in Egypt by driving food grains prices higher, an economist said on Thursday, but biofuels officials dismiss the claim, citing global food demand as the cause.
Wall Street economist Lawrence Kudlow argued that federal subsidies paid to support ?xml:namespace>
Kudlow, former chief economist at Bear, Stearns & Co and now president of his own
Kudlow said that because the US dollar is the world’s reserve currency, those sharp gains in the dollar cost for corn are reflected in food grains prices worldwide.
A good part of the global increase in food grains costs, said Kudlow, “can be placed at the doorstep of bipartisan US policies to subsidise ethanol”.
Citing the Wall Street Journal data, Kudlow noted that in 2001, only 7% of
“So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies,” Kudlow argued.
As the world’s largest importer of wheat,
Part of the increased cost of food grains, he said, must be attributed to US Federal Reserve Board policies of the last three years, which have kept interest rates at near zero and also have flooded the market with dollars. Those actions in turn have spurred inflation in global food costs, Kudlow said.
But Matt Hartwig, spokesman for the Renewable Fuels Association (RFA), dismisses Kudlow’s argument.
“What is forcing grain and food prices higher are the same factors that always drive prices higher - global demand, adverse weather, surging energy prices, export bans, monetary polices and, of course, speculation,” Hartwig said.
He noted that 2009 and 2010 worldwide grains supplies were the highest, successively, ever recorded, at more than 2.6m tonnes annually.
“The unrest in
To discuss issues facing the chemical industry go to
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|