Do Biofuels Mean Inexpensive Food Is a Thing of the Past?

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2015-07-21
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Babcock, Bruce
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Jensen, Helen
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Babcock, Bruce
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Center for Agricultural and Rural Development

The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.

CARD researchers develop and apply economic theory, quantitative methods, and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers; the research community; agricultural, food, and environmental groups; individual decision-makers; and international audiences.

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Concern is growing that expanded biofuels production means the end of inexpensive food. After all, the prices of corn, soybeans, and wheat have dramatically increased and are likely to stay high. The line of thinking that expects expensive grains and oilseeds to lead to dramatically higher food costs follows the logic often used by proponents of U.S. farm programs. Many proponents justify subsidies by claiming that farm payments work to keep food plentiful and inexpensive by artifi cially keeping the price of commodities lower than production costs. For this justifi cation to be valid, farm subsidies would have to expand commodity production, thereby lowering commodity market prices. Lower prices would then, in turn, lead to an expansion in the production of the food that all of us actually eat (pork chops instead of no. 2 yellow corn), which would cause food prices to be lower than they would be otherwise. Thus, according to the argument, we do not need to spend as much of our income on food. By the same logic, high commodity prices caused by subsidized biofuels should result in a reduction in the production of food and higher food prices.

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