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Ethanol boom; global demand raising US food prices to 25-year high

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Growing world economies, rising food demand and expansion of corn based ethanol production has caused the rate of US food inflation to reach a 25-year peak. Bill Lapp, president of Advanced Economic Solutions released a study on Thursday that compared food inflation data since the 1960s.

Food crops are increasingly being used as inputs for industrial productions. Increased production of ethanol from corn crop is putting pressure on the price of corn. Corn prices touched a record height in a decade at $4.37 in February. While 43% of US corn crop is fed to livestock to produce meat, dairy products and eggs the percent of the crop utilized for ethanol production is increasing by the day. 24% of this year’s crop had been turned into ethanol, a 14% rise from previous year.

A tumbling dollar and global economic growth has further contributed to the inflationary pressure on food prices with prices of wheat, soybeans experiencing similar upturns. Rising energy prices is raising demand for ethanol production.

The American consumers are now geared to face rising food prices. The entire inflationary pressure in food prices cannot be attributed to rising demand in food crop production only but a major part can be adduced to other linkages including rising cost of labor, fuels, transportation, packaging and other non-farm costs.

Source:enn

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