The Unseen: Ethanol Puts the Freeze on Ice Cream, et al

The seen: Your federal tax dollars pumping the life-blood through the domestic ethanol business.

The unseen: Higher prices for consumer goods. First, there's why my groceries are so much more expensive:

Amy Green’s Ivanna Cone ice-cream emporium in Lincoln, Nebraska, has already raised its prices for a small cone to $3.50 before tax, up from $2.95 a few months ago. She also estimates that she is paying $150 more a week for the butterfat that she uses in her ice-cream.

The squeeze on ice-cream makers, chocolate manufacturers and pizza companies – all of whom use dairy produce as a raw material – is set to tighten as the price of a gallon of milk in the US – up 55 per cent in the past 12 months in some American states – is now the same as a gallon of petrol, with dairy prices accelerating faster than the cost of fuel.

But all of this can be traced back to agricultural subsidies for ethanol.

This month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol.

And then there's the impact on tortillas.

Mexicans who eat a traditional diet gain 50 percent of their calories, and 70 percent of their calcium, from tortillas and other corn-based products. Another expert reckons tortillas account for 40 percent of protein in such diets.

[...]

A family of four eating a traditional diet consumes a kilogram -- 2.2 pounds -- of tortillas per day. A year ago, a kilo of tortillas in some areas of Mexico cost about 63 cents. By January, the prices in the same places had soared to between $1.36 to $1.81 per kilo -- a big chunk of the nation's $4.60 per day minimum wage. In short, low-income people found themselves priced out of the tortilla market, and forced into less-nutritious alternatives like white bread and ramen noodles.

But who's really making the money, behind the scenes? Why ADM, yet again!

Indeed, the same company responsible for rigging up the U.S. corn-based ethanol market is also profiting handsomely from soaring tortilla prices. Archer Daniels Midland, the leading U.S. ethanol maker and the world's biggest grain buyer, owns a 27 percent stake in Gruma, Mexico's dominant tortilla maker. ADM also owns a 40 percent share in a joint venture with Gruma to mill and refine wheat -- meaning that when Mexican consumers are forced by high tortilla prices to switch to white bread, Gruma and ADM still win.

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Related articles on ethanol:

How cash and corporate pressure pushed ethanol to the fore
http://grist.org/news/maindish/2006/12/06/ADM/

How Ethanol Inflates Food Prices
http://volokh.com/posts/1182040079.shtml

Gasoline Prices: Conspiracy or Plot?
http://www.reason.com/news/show/119300.html