Biofuel Bean Counters Forget to Count the Beans

When the president’s top bean counters at the Council of Economic Advisers rushed to downplay ethanol’s impact on food inflation, they forgot to count the beans.

Counting the soybeans. (Getty Images)

In a June 2 speech at a high-level United Nations food-security conference in Rome, U.S. Agriculture Secretary Ed Schafer said that biofuels accounted for only 2% to 3% of this year’s expected 43% surge in global food inflation. His report relied on data supplied by Edward Lazear of the Bush administration’s Council of Economic Advisers.

The problem? It didn’t count the impact of biodiesel production, which uses soybeans as its main feedstock, according to USDA chief economist Joseph Glauber. It also didn’t count the impact higher soybean prices have had on global food prices.

It turns out that makes a difference. In the past year the price of soybeans, one of America’s biggest crops, has soared as more of the beans were used for biodiesel and since fewer acres of beans were planted last year to accommodate more acres of corn for corn-ethanol. Soybeans, soybean oil and soybean meal are ubiquitous in the food chain, found in everything from livestock feed to packaged food to tofu.

Just 10 days after Mr. Schafer’s UN testimony, Mr. Glauber testified before the Senate Energy and Natural Resources Committee that biofuels have actually contributed up to 10% of the overall increase in global food prices.

Given that both sets of numbers came from the same administration, which numbers are right? Mr. Glauber said the second set of numbers. He described the CEA data as a “far more limited analysis.”

Granted the issue of measuring the total impact biofuels have had on global food prices is tricky at best. Already interest groups are going to war over the issue, armed with their respective studies.

Farm and ethanol groups say biofuels have become a scapegoat for higher food prices, claiming the real culprit is surging oil prices. In their corner: data supplied by the Bush administration.

Livestock and food companies want the U.S. to step off the biofuels accelerator by rolling back government mandates that will require the oil industry to use 9 billion gallons of ethanol this year. In their corner: Keith Collins, Mr. Glauber’s predecessor, who recently released a study funded by Kraft Foods Inc. showing that ethanol is having a bigger impact than the government has acknowledged. –Lauren Etter