CNN Business Reporter Links Rising Corn Costs to Ethanol

     You’re going to need a few extra bucks to pay for those corn flakes every morning.

     CNN’s senior business correspondent Ali Velshi let viewers in on an underreported fact about rising commodities prices: the government mandate for ethanol production is making corn and other agricultural products more expensive—making inflation a top priority for Americans.

     “Several years ago, we made some decisions about how corn is going to be used to make ethanol, which is added to our gasoline,” said Velshi on "American Morning" April 4. “A number of people think that that was meant to reduce our dependency on crude oil. What is does is it takes what is fundamentally a food source and makes it into a gasoline source. That’s caused corn to go up.”

     He went on to explain that in the recent food commodities surge, which includes products like wheat, soybeans and rice, corn has gone up to $6 a bushel—making everything from animal feed to cereal more expensive.

     But it doesn’t stop there.

     Anchor Alina Cho pointed out that high fructose corn syrup also sends the price of soda up and Velshi pointed out that the price surge would also affect other products like dairy, chicken and beef.

     Elaine Kub, a grains analyst with Data Transmission Network in Omaha, Neb., told the Associated Press April 4, “Higher corn prices is [sic] going to affect meat prices. If you're feeding with $6 corn, you'll definitely have some (cost) pressure.”

     The April 7 issue of Time magazine slammed ethanol mandates for contributing to increases in global crop prices and for devastating the environment. Reporter Michael Grunwald said rising prices are “spurring a dramatic expansion of Brazilian agriculture, which is invading the Amazon (rainforest) at an increasingly alarming rate.”

     But other journalists have forgotten to mention ethanol’s effect on commodity prices.

     On the March 12 “Today” show, CNBC’s Erin Burnett reported on the rising cost of basics like chicken, milk and butter, blaming “energy prices and a weak dollar,” but did not mention government mandated ethanol.

     NBC’s Lee Cowan didn’t mention the ethanol-related cost of animal feed either when reporting on the rising cost of milk on an August 2007 “Today” show.

     In addition to a 2005 law requiring 7 billion gallons of ethanol to be mixed into gasoline supply, an energy bill signed by President George W. Bush in December 2007 increased the bio-fuel mandate to 35 billion gallons of ethanol every year.


      “[T]hat’s not going to do anything to bring down prices at the pump,” Max Schulz, a senior fellow at the Manhattan Institute, told the Business & Media Institute after Bush signed the bill, “and it’s also going to have a further kind of serious effect driving agricultural prices higher as well."