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Commodities Trading: Did ethanol cause high food prices?

Posted May 16, 2008

“The Bush administration is currently disputing the International Monetary Fund’s claim that increased production of biofuels, namely ethanol, is the biggest factor in rising food prices.” — Jason Simpkins

by Jason Simpkins, Money Morning

Baltimore — (TFN): U.S. consumer prices rose less than forecast in the month of April, assuaging some inflation fears, but food prices experienced their biggest jump in 18 years.

The consumer price index (CPI) rose 0.2% in April after edging up 0.3% the month prior, the Labor Department said yesterday (Wednesday). Core prices, which exclude food and energy, rose 0.1%.

Energy prices stagnated after soaring 1.9% in March, but that’s expected to change as both oil and gas have notched a series of record highs this month.

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Commodities Trading: Food prices soar

Food prices were perhaps the report’s biggest eye-catcher, climbing 0.9% for the month, the biggest upsurge since January 1990. Fruit and vegetable prices rose 2% and bread prices increased 1.5%, CNNMoney reported. The cost of bread was 14.1% higher than the year-ago period. Milk prices rose 0.9% and are up 13.5% from a year ago.

The Bush administration is currently disputing the International Monetary Fund’s claim that increased production of biofuels, namely ethanol, is the biggest factor in rising food prices. Read on to learn whether the IMF is right.

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