The Ethanol Papers - Paperturn manuscript - Flipbook - Page 613
Unfortunately, The World Bank retraction did little towards taming the false accusations that ethanol production has resulted in higher prices; false accusations that continue right up until today three years after the retraction and some
five years after the publication of Bryce’s book. I think there are at least 3 reasons: Like all initial explosive reports in the media, retractions are never covered
with the same vigor. Second, the oil industry’s public relations propaganda war
chest is so large that they were able to buy the story off. And third, because the
excuse that corn and ethanol is causing the prices to rise was such a great way
for snack food manufacturers to explain why they increased their prices that
they just haven’t let go.
By the way, the three reasons are my own conjecture, as an authentic media
expert with more than 40 years of extensive hands-on experience in every facet
of marketing, advertising, production and sales.
A new report from The World Bank, which was just issued last month in May
2013 confirms that the primary driver in rising food prices is the cost of crude
oil.
LONG-TERM DRIVERS OF FOOD PRICES
John Baffes
Allen Dennis
The World Bank Development Prospects Group & Poverty Reduction and
Economic Management Network
Trade Department
May 2013
CONCLUSIONS AND FURTHER RESEARCH
This paper uses a reduced-form price-determination model on 1960-2012
annual data of five food commodities (maize, wheat, rice, soybeans, and
palm oil) to assess the relative contribution of various factors to their respective price changes. The factors include crude oil prices on the supply
side, stock-to-use ratios, three macroeconomic indicators (exchange rate
movements, interest rates, and inflation), and income on the demand
side. The paper concludes that food commodity prices respond strongly
to energy prices, stock-to-use ratios, and (in a mixed manner) to exchange rate movements. With a few exceptions, interest rates and income growth do not matter. Yet, crude oil prices mattered the most during
the recent boom period because they experienced the largest increase.
