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Abstract
The effects of biofuel production on commodity prices and their transmission to retail food
prices are discussed. Factors driving higher commodity prices are tight global supplies and
increased demand of corn ethanol in the short term. Evidence suggests that higher corn prices
contribute to food price inflation for some food items. These include eggs, poultry, pork, beef
and milk. The findings imply that food price inflation for these items is related to increased
production of corn ethanol, primarily because of high oil prices. Higher oil prices also increase
fuel and energy costs, which increase marketing costs for all food categories.