The United Soybean Board partnered with Purdue University in a food and fuels study to assess whether increased use of soybean oil in biofuels is contributing to higher retail prices of food for consumers.
One important factor missing from this equation is that only one-fifth of soybeans are oil. Soy is mostly dietary used as a high quality protein in animal diets. This expanded exploitation of oil to meet the demand for biofuels will increase dietary availability and push down the price of animal protein products, partially offsetting higher oil and bakery prices, and increasing consumer demand. Leaving the overall “food at home” portion of the price index (CPI) essentially unchanged. The static nature of the CPI can be attributed to the fact that meat prices make up a larger portion of the CPI than fats and oils.
“The economic model we created ties farm supplies of soy to retail demand for a variety of foods,” said Jason Lusk, a food and agricultural economist at Purdue University. “Our assessment of the impact of increased soybean oil demand on grocery store prices found little change in the consumer price index. categories rose between 0.16% and 4.41%, while retail prices of dairy, beef, pork, poultry and eggs fell between -0.01% and -0.16%.”
The study found that a 20% increase in the amount of soybean oil demanded for use in biofuels would have the following price impact breakdown (all else being equal):
- Soybean oil rose 0.16% in retail prices for fried foods and baking, 0.82% in margarine, 4.41% in salads/edible oils and 0.16% in other oil-containing foods.
- Animal protein fell by 0.16% in egg retail prices, 0.13% in chicken retail prices, 0.06% in pork retail prices, 0.02% in dairy retail prices and 0.01% in beef retail prices.
- Farm-level soybean prices rose 0.73%, farm incomes for soybean growers increased 0.92%, and overall soybean crude oil prices rose 8.17%.