GoodFuels

Food Versus Fuel is Fallacy

An analyst with a major agricultural financial institution says “food versus fuel” is basically a misleading sound bite.

According to Karol Aure-Flynn, executive director of the Rabobank Food and Agribusiness Research and Advisory department, “The fallacy of the headline is that there is a direct competition between the two; that it’s either/or. The reality is that strong global economic growth has changed the demand equation for U.S. commodities.”

Aure-Flynn also noted in a recent Rabobank podcast that while prices at the farm level have increased this year, they have been outpaced by production costs for farmers.

“Farmers’ profitability doesn’t change retail prices. And farmers’ profitability isn’t guaranteed by high grain prices. The same factors that are lifting grain prices are lifting production costs,” said Aure-Flynn. “So, yes, the farm price index is at 162 percent of what it was 1990-1992, but at the same time the price index measuring what farmers pay — for services, farm wages — is 189 percent of base.”

Rabobank is a global financial services leader providing institutional and retail banking and agricultural finance solutions in key markets around the world.