As Cars Go Green, Food Prices Will Jump

Ethanol demand has unexpected impact on farmers and the global food supply.

ByABC News
April 9, 2007, 7:44 PM

April 9, 2007 — -- Near Lake Geneva, Wis., farmer David Adams plans to seed his fields. But this year he'll be sticking with one commodity -- corn.

In about two weeks, he'll be fanning out over several hundred rolling acres, responding as he and other farmers do every year to the law of supply and demand. And this year the demand is for corn, corn and more corn.

"The price of corn looks like it will be better than wheat or beans," Adams says, while understating the case a bit.

Corn has about doubled in price during the last few months, thanks to an increasing demand for ethanol -- the mostly corn-based alternative fuel that burns cleaner than oil and, ideally, could one day reduce American dependence on oil imports.

And with ethanol production taking an increasing percentage of the corn crop, farmers are hard-pressed to meet the traditional demand for corn as a food stuff for human or animal consumption, even though the Agriculture Department predicts 15 percent more corn will be grown this year than last.

Adams will plow under his wheat and alfalfa fields to plant corn instead.

With Detroit now talking up the merits of "flex-fuel" cars that could run on ethanol, distilleries that make the stuff are sprouting across the Midwest like so many corn stalks. All of which is great -- if you grow corn.

But if, say, you're David Kyle, a dairy farmer a few miles up the road in Elkhorn, Wis., the higher corn prices are no cause for celebration.

"I'm sure that they didn't think down the line how the livestock producers would be affected," he says in an interview outside his barn.

Kyle has about 100 head of Holstein milking cows. They are animals that just love to eat corn feed, and Kyle says corn protein helps produce better milk. But the higher corn prices Adams enjoys mean that Kyle has to pay almost double this year for the corn feed he gives his cows.

Kyle says he may well have to reduce his herd, which means "there'll be less milk produced because of the price of corn. That's the bottom line."