New US group defends ethanol in food vs fuel fight

A new group is adding its voice to the debate on using crops to produce alternative fuels such as ethanol amid rising food prices and shortages in some countries.

The Alliance for Abundant Food and Energy in Washington D.C. was created by Archer Daniels Midland Co, DuPont Co, Deere & Co, Monsanto Co and the Renewable Fuels Association.

"There are critics who are trying to create an either-or decision between food and fuel," said Mark Kornblau, the alliance's executive director.

"We believe this is a false choice. Today, more than 90 per cent of crops in the US and around the world are used exclusively for food."

The group believes that agricultural innovation - such as genetically modified crops - is the best way to address global hunger, not reducing biofuel production.

Decatur, Illinois-based ADM is one of the world's largest producers of biofuels, and Monsanto is a leading producer of GMO seeds.

Mr Kornblau did not say exactly how much money the founding members contributed but said "the initial budget is in the multimillions."

The food versus fuel debate heated up as US food prices last year saw their biggest increase in 15 years and are forecast to rise by five per cent this year.

World food prices rose by 40 per cent last year, causing food riots, hoarding and bread lines in some countries.

At the heart of the debate is to what degree the popularity of biofuels has contributed to the rapid rise in food prices.

Corn, soybean and wheat prices at the Chicago Board of Trade hit record highs this year amid increased global demand for food, rising oil prices and government mandates for biofuels.

About 34 per cent of the US corn crop this year will be used to make ethanol, compared with 23 per cent last year, according to the US Agriculture Department.

"Most credible studies say the rising price of food right now can be attributed to the high price of oil," Mr Kornblau said. "To get your Idaho potatoes to Massachusetts or Florida, you have to have them shipped."

The new alliance faces tough opposition. Both livestock and food producers have lobbied to reduce or eliminate subsidies for ethanol. Their efforts may have succeeded to some degree.

The new US farm law cuts the tax credit for corn-based ethanol by six cents to 45 cents a gallon beginning of next year. The law extends the 54-cent import tariff on ethanol through 2010.

Tyson Foods Inc. has backed eliminating US ethanol subsidies and has seen its profits hurt by higher feed costs for its poultry, pork and beef processing business.

The Grocery Manufacturers' Association has criticised ethanol for driving up food prices.