Study: Corn ethanol may cost foodservice $3.2B a year

A new study commissioned by the National Council of Chain Restaurants found that the use of corn as a fuel source potentially could cost U.S. foodservice chains as much as $3.2 billion annually.

The report, which was conducted by PricewaterhouseCoopers, contends that the federal government’s policy of fostering the use of corn — the chief ingredient in U.S. livestock feed — as a source for ethanol in gasoline is artificially inflating corn prices and thereby driving other food chain commodity costs upward.

As a result, chain operators and other restaurateurs must wrestle with historically high food costs at a time when the sputtering U.S. economy continues to prompt many consumers to rein in spending.

“The use of corn-based ethanol required by the federal Renewable Fuel Standard mandate has dramatically distorted the market and increased costs throughout the food supply chain,” said Rob Green, director of the NCCR in Washington, D.C.

The mandate, he continued, “has had an adverse effect on the chain restaurant industry, which has witnessed marked increases in commodity prices and associated costs to the tune of billions of dollars a year.”

Corn-based ethanol is a renewable energy resource favored by environmentalists and many within the government for use as an oxygenator in gasoline that helps reduce exhaust emissions and is seen as being better for the environment that other additives.

Today, about 40 percent of the U.S. corn crop — or 5.3 billion bushels — is being converted into corn-based ethanol, which yielded 13.2 billion gallons in 2011. That figure is expected to rise to 15 billion gallons by 2015, according to the American Coalition for Ethanol.