UPDATE 1-Bernanke backs lower tariff on Brazil ethanol

Thu Feb 28, 2008 12:03pm EST
(Adds Bernanke's comments)
WASHINGTON, Feb 28 (Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday he favored cutting high tariffs on Brazilian ethanol to help take pressure off food prices.
"As you know, I favor open trade and I think allowing Brazilian ethanol, for example, would reduce costs in the United States," Bernanke told the Senate Banking Committee.
Most of the ethanol made in the United States comes from corn, and domestic production is protected from sugar-based Brazilian ethanol by a steep tariff.
Bernanke said it was hard to say how much current strong demand for ethanol was boosting food prices.
"But it is the case that a significant portion of the corn crop is being diverted to ethanol, which raises corn prices," Bernanke told the panel.
"And there's some knock-on effects. For example, some soybean acreage has been moved to corn production, which probably has some effect on soybean prices. So there is some price effect on foodstuffs coming through the conversion to energy use," Bernanke said. (Editing by Jan Paschal)