Grumbling over ethanol mounts among food execs

By Ben Klayman - Analysis

CHICAGO (Reuters) - Prices for commodities are steadily rising and top food industry executives are grumbling that costs will not fall as long as the U.S. government continues to subsidize corn growers for making ethanol.

The ethanol industry has been blamed for everything from rising food prices to environmental damage, and its heavy use of corn has even divided the farm community. Grain farmers celebrate record prices while livestock producers and bakers complain about rising costs.

The subject should be revisited by lawmakers, according to top executives at the Reuters Food Summit in Chicago this week. Some said production of renewable fuels should be capped or other benefits stripped away, or consumers' wallets will continue to feel the pinch.

"We would love to have that acreage focused on wheat and products that are going into food, but it is what it is at this point," Sara Lee Corp North American Chief Operating Officer CJ Fraleigh said of the corn being used for ethanol.

"The pure economics of ethanol do not support that as being a good economic decision," he added. "In the short term, the use of corn for ethanol is not a good decision for the American consumer."

Ethanol has been touted as a way to reduce America's dependence on foreign oil. Corn use for ethanol tripled from 2001 to 2006, and the government estimates that one of every four bushels of corn produced this year will be used for ethanol.

Policy makers are pushing that surge. An energy bill signed into law in December calls for production of 9 billion gallons of renewable fuel this year, up from 5 billion in 2005, and rising to 36 billion gallons in 14 years.

The government also provides fuel makers a tax credit for blending ethanol into auto fuel and has a tariff on imported ethanol.  Continued...