Last decade, an alternative energy - ethanol is started to be produced in order to be an alternative to oil consumption. Since fuel ethanol industry is based largely on corn, what would be the effect of ethanol production on food prices?

In previous decades, corn has been sold cheaply. Now that the ethanol industry is beginning to arise, farmers are able to make more profit as corn prices are increasing. There is a distinction between the use of corn for food and it's use for fuel. Ethanol is made from field corn. A majority of field corn is used for ethanol production. Sweet corn is widely known to serve frozen, fresh, or canned as a vegetable for eating. The corn we are using to make biofuels is not the corn that people eat. In recent years, it has been studied that the impact that biofuels/ethanol has on food prices is very minimal compared to food prices globally. It has been assumed by researchers that ethanol is not the cause for food prices to rise. From my understanding I believe that food prices are increasing from the influence of the ethanol industry, but not from that industry alone. It depends on a number of factors which influence the change in supply and demand. Prices will increase if farmers do not produce the right amount of corn for the quantity demanded. Therefore it will have an effect on the supply shortfall. The weather can affect prices as well. For example, there was a drought in the United States last year which had decreased corn production. This lead to the increase of the price of corn due to the decrease in supply and increase in demand. Another factor is the demand for corn in other countries. Large population countries such as China highly rely on corn, this will increase the production of corn and raise demand. If all factors remained equal such as production of corn remains the same year to year and the production of ethanol is increasing, than demand for food production will increase and the competition between food producers will always increase.