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As Congress grilled top executives of the five biggest U.S. oil companies on Tuesday on their soaring profits, the Nebraska Corn Board said oil companies are the biggest culprit of high food costs.
"Farmers have been taking it on the chin while oil companies are raking in record profits," said Don Hutchens, executive director of the Nebraska Corn Board.
Hutchens said Exxon alone had profits of $40.7 billion last year, while the five leading oil companies had a combined profit of $123 billion.
He said the entire U.S. corn crop for 2006-07 had a gross value of $32 billion, and only 20 percent of that crop was used to produce ethanol.
"When you compare the profit of one oil company last year to the total gross value of an entire year's U.S. corn crop, you can quickly understand why Congress is asking oil company executives to explain why their profits are hitting record levels while the American consumer pays for those profits at the pump and supermarket," Hutchens said. "The oil companies are also fighting to keep $18 billion in tax breaks over the next decade."
According to the National Corn Growers Association, retail diesel and gasoline prices are up nearly 40 percent since January 2007. Hutchens said fuel contributes to costs at every step in the supply chain.
A recent analysis by economist John Urbanchuk of LEGC, a global expert services firm, found, "By a factor of two to one, energy prices are the chief factor determining what American families pay at the grocery store."
Hutchens said the agriculture industry is anxious to hear what the oil companies have to say about renewable energy.
"Our perspective is that they have not shown much support and have, in fact, tried to shift the blame of subsidies and high food costs to the American farmer," he said. "In reality, the American farmer has worked hard for the last 30 years to show the benefits of a renewable energy source like ethanol."
According to the Energy Information Administration (EIA), ethanol will reduce U.S. petroleum demand by 130,000 barrels per day in 2008.
According to EIA: "The slowing economy, combined with high petroleum prices, is expected to constrain growth in U.S. consumption of liquid fuels and other petroleum products to just 40,000 barrels per day (bbl/d) in 2008. After accounting for increased ethanol use, U.S. petroleum consumption falls by 90,000 bbl/d."
According to the Renewable Fuels Association, world oil price increases show no sign of slowing down. EIA estimates crude oil will average $94 a barrel in 2008, up from $72 a barrel in 2007.
EIA suggests that Americans can expect to pay an average of $3.21 per gallon, with many areas seeing prices spike well past $4 per gallon.
Grand Island drivers were paying, on average, $3.23 per gallon for regular gasoline without ethanol on Tuesday, according to the Nebraska AAA. That's up nearly 50 cents per gallon from a year ago.
Currently, 143 ethanol biorefineries nationwide have the capacity to produce nearly 8.2 billion gallons annually. There are 57 ethanol refineries under construction and seven expansions with a combined annual capacity of more than 5.2 billion gallons.
On Monday, the U.S. Department of Agriculture reported farmers intend to plant 86 million corn acres this year, an 8 percent drop from 2007's high acreage but the second-highest acreage intention since 1949.
Ron Litterer, National Corn Growers president, said high oil prices are squeezing farmers despite the higher corn prices.
On Tuesday, corn closed at $5.60 per bushel at the Aurora Co-op Elevator in Aurora.
Litterer said growers are facing tremendously higher input costs particularly for fertilizer and diesel fuel.
"We need access to more affordable sources of natural gas for fertilizer production, and we're concerned about the impact of higher crude oil prices on farmer profitability," he said.
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