Higher US ethanol blends would spike food: experts

By Timothy Gardner

NEW YORK, June 9 (Reuters) - Raising the allowable levels of ethanol in conventional U.S. gasoline would push up prices of corn and other grains and ultimately meat and dairy, experts said on Tuesday.

The government allows conventional gasoline to be blended with up to 10 percent ethanol. But the ethanol industry, which has grown rapidly over the last two years amid generous government incentives and mandates that call for more ethanol blending over time, wants the blend rate raised to 12 percent to 15 percent ethanol for the industry to continue growing.

"Ultimately this will translates into higher livestock and dairy prices, and eventually further upward pressure on consumer food prices," said Bill Lapp, president of Advanced Economic Solutions.

He said in a report issued on Tuesday that 12 to 15 percent blends would push up the amount of land needed to grow corn to at least 100 million acres by about 2010 to 2015.

That would compare to 76.5 million acres that were the average from 1983 to 2006 and such an increase could force corn farmers to take land away from other crops, helping to raise prices for all sorts of grains, he said.

Using 100 million acres could spike corn prices to a level that would make last June's price of about $7.50 a bushel, "look like a walk in the park," Lapp told reporters in a teleconference.

The U.S. Environmental Protection Agency is evaluating whether to lift the blend level beyond 10 percent. A major concern is whether the higher blends would hurt fuel lines and other aspects of car engines, especially in older vehicles. The EPA has said it has up to Dec. 1 to act upon a request to increase the blend level to 15 percent.

Ethanol producers say hybrid seeds and better planting techniques have increased corn yields.