Maine bread company bashes U.S. fuel policy Federal program implicated in escalating flour costs

A Maine bread company executive testifying before a Senate committee in Washington on Wednesday said the federal government’s renewable fuel policy has encouraged skyrocketing food prices.

Andrew Siegel, vice president and treasurer of York-based When Pigs Fly Sourdough Bread Co., told the Homeland Security and Governmental Affairs Committee that his company went from spending $7,600 a week on flour last September to as much as $28,000 a week in February. Currently the price has settled to about $15,000 per week for the roughly 50,000 pounds of flour the bakery uses.

“We have raised our prices. Customers are upset and our employees are feeling the pain due to no pay raises and increased costs of all their living expenses,” Siegel said. “I think that we will survive this crisis. My fear is that … next year we will not be so lucky.”

Siegel was one of four witnesses who spoke about whether agricultural subsidies aimed at reducing the nation’s reliance on imported oil are having serious, unintended consequences for food supplies and prices.

Republican Sen. Susan Collins of Maine, the committee’s ranking member, initiated the hearing, which she said was an unlikely topic for the Senate Agriculture committee to take up because its members are strongly in favor of the subsidies.

The federal biofuel subsidies, which heavily favor the use of food-based fuels such as ethanol made from corn, have diverted acreage from crops such as wheat and soybeans and has had ripple effects on the cost of those foods, Collins said.

Other factors driving up prices include Asian countries that are using more grains to feed livestock, poor weather conditions that have yielded a diminished wheat crop, and the role of speculation in the commodities markets, Collins said.

Subsidies for ethanol production, tariffs on ethanol imports, and mandates for ethanol use have had a measurable impact on the U.S. corn crop, Collins said. In 1997, only 5 percent of the corn harvest was used for ethanol production. That portion grew to 20 percent of the 2006 harvest. The U.S. Department of Agriculture estimates that 24 percent of last year’s corn crop is being used for ethanol, and that ethanol’s claim on the 2008 harvest will climb to 33 percent.

The federal government formerly kept crop prices up during a surplus by distributing subsidies to farmers to discourage them from planting more crops. That program ended in 1996, according to Collins’ office.

“The nutritional threat, especially to lower-income families with children or to senior citizens with limited incomes, is clear,” Collins said. “The high prices and shortages also hurt small businesses like the Maine family bakery whose future is less secure due to escalating costs.”

Collins cited World Bank statistics that global food prices have increased by 83 percent in the past three years. In the U.S., the Commodity Futures Trading Commission reports, a sampling of April 2008 prices shows the following one-year increases:

. Wheat, up 95 percent.

. Soybeans, up 83 percent.

. Corn, up 66 percent.

. Oats, up 47 percent.

“We must therefore examine the impact that American bio-fuel policy is having on the global food crisis and whether our policy needs to be adjusted to mitigate unintended consequences in the United States and elsewhere,” Collins said.

She has sent a letter encouraging the U.S. Environmental Protection Agency to modify the renewable fuels mandate, which requires, in part, that fuel marketers blend 15 billion gallons of corn ethanol by 2015.

Collins said important next steps include a subsequent hearing on the role of speculation on commodities markets and supporting more research on alternative fuels made from nonfood substances such as switch grass.