World Grain - April 2007 - 41

BIOFUELS QUARTERLY: FOOD VERSUS FUEL DEBATE WAGES ON

78 million. Maize production fell from
11.1 billion bushels in 2005 to 10.5 billion bushels in 2006.
"It's not yet a situation where we're
struggling to produce more corn to meet
ethanol production. Rather the signals
have not been adequate to meet this train
coming down the track," Richman said.
Export demand has increased, similar
to 1995-96, which also was a modest
crop year. Additionally, hedge funds and
other speculative interests have jumped
into the market and will push it as far
in one direction as it will move. Lastly,
world wheat supplies are tight.

third of the minimum daily wage.
"We have to find a way to cushion the
impact of these food staples, especially
in countries like ours that are less developed," Servitje said.
The government and industry also
need to understand the short- and longterm implications of this trend, he
said, and spend time and resources to

educate the different groups, especially
consumers.
U.S. wheat production is also being impacted by increasing ethanol output and
corn prices. Even though the hard wheat
crop is projected to hit 1 billion bushels,
prices are not falling due to the significant
rise in corn prices, said Hayden Wands,
director of procurement for Sara Lee.

For you to
produce high-quality
food products,

ETHANOL'S IMPACT
U.S. corn is used for domestic food
purposes, but its top uses are for feed and
exports. Increased corn costs will have

we always
focus on
our part.

"We're going to be having
the food versus fuel debate
over the next decade because
it's going to continue to be a
corn-based industry."
- Scott Richman,
Informa Economics
?r
the biggest impact on the price of meat,
where material costs are more significant
than value-added expenses. In contrast,
material costs for bakeries and tortilla
manufacturers are much less than valueadded expenses such as marketing. This
provides a shock absorber in terms of the
retail price consumers are charged, Richman said.
"It's a little bit of a balancing act," he
said. "Is corn-for-ethanol driving up food
prices, and is it driving down fuel prices
to the same extent? Or are both bit players in both markets."
In Mexico, corn tortilla prices doubled
in less than three months, said Daniel
Servitje, chief executive officer of Grupo
Bimbo. Tortillas are a main staple in the
Mexican diet, and for low-income consumers the cost of tortillas represent one-

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