Skip to comments.Less Corn Could Mean Higher Food Prices
Posted on 03/31/2008 5:32:46 PM PDT by Brilliant
WASHINGTON (AP) -- From chicken nuggets to corn flakes, food prices at grocery stores and dinner tables could be headed even higher as farmers cut back on the land they're planting in corn this spring.
Corn prices already are high, and a drop in supply should keep them rising. Combine that with the huge demand for corn-based ethanol fuel -- and higher energy costs for transporting food -- and consumers are likely to see their food bills going up and up.
Farmers are now expected to plant 86 million acres of corn this year, the Department of Agriculture predicted Monday, down 8 percent from last year, which was the highest since World War II.
Corn is almost everywhere you look in the U.S. food supply. Poultry, beef and pork companies use it to feed their animals. High fructose corn syrup is used in soft drinks and many other foods, including lunch meats and salad dressings. Corn is often an ingredient in breads, peanut butter, oatmeal and potato chips.
Corn components are even used in many grocery store items that aren't edible -- including disposable diapers and dry cell batteries.
When the corn that goes into those products goes up in price, increases eventually can be passed along to consumers.
And corn prices have skyrocketed in recent years, almost tripling since 2005.
Corn began its latest surge in early 2007, rising from just over $3 per bushel to record prices above $5 per bushel today. If prices hold steady or rise, the average yearly price per bushel in 2008 will be the highest ever, according to USDA statistics.
Corn climbed higher Monday following the release of the USDA report, with the most-active contract briefly hitting an all-time record of $5.88 a bushel on the Chicago Board of Trade before settling at $5.6725 a bushel, still up 6.75 cents.
They have been pushed along by the burgeoning ethanol industry, which turns the crop into fuel, and by rising worldwide demand for food.
"People who are working families, just barely making it and already paying higher prices for gas and home heating oil are going to be shot in the pocket by higher food prices," said Carol Tucker-Foreman of the Consumer Federation of America.
Richard Lobb of the National Chicken Council said recent increases in the cost of corn feed have been absorbed by larger chicken companies, such as Pilgrim's Pride Corp. or Tyson Foods Inc., that provide feed to poultry farmers. But that could change.
"At a certain point we have to readjust and get back to square one," Lobb said. "The only people who have money ultimately are consumers."
Tucker-Forman of the Consumer Federation of America and Scott Faber of the Grocery Manufacturers Association both say rising food prices could be stemmed if Congress would pull back subsidies for the ethanol industry.
The number of ethanol plants has almost tripled since 1999 and more are being built, according to the Renewable Fuels Association. Such plants could gobble up more than a quarter of the country's corn crop.
"Food prices being driven by the food-to-fuel mandates will most significantly affect the working poor," Faber said.
Matt Hartwig of the Renewable Fuels Association said the higher prices can't be blamed only on the ethanol industry.
"There are a host of factors contributing to higher corn prices -- surging global demand to feed people and livestock, a weak dollar encouraging exports, and rampant speculation -- that have a far greater impact than America's ethanol industry," he said.
According to the Agriculture Department, corn planting is expected to remain at historically high levels but may dip this year because of the high expense of growing corn and favorable prices for other crops, such as soybeans.
As many farmers have switched, soybean planting is expected to be up 18 percent this year, at almost 75 million acres. Farmers are also expected to plant more wheat this year, which could lower retail prices for pasta and bread.
Soybeans for May delivery fell the 70-cent limit Monday on the Chicago Board of Trade, settling at $11.9725 a bushel. Still, soybean prices are up 45 percent since March 2007.
The Department of Agriculture report is based on sample surveys of 86,000 farm operators in the first two weeks of March.
Terry Francl, a senior economist for the American Farm Bureau Federation, predicted Monday that corn prices will continue to rise but he said consumers shouldn't panic just yet.
Many farmers will take a look at the report and decide to plant corn instead of other crops, he said, and weather conditions could also change things.
"We're going to have to wait until we go through the spring planting season," he said.
John Hoffman, a soybean grower from Waterloo, Iowa, and president of the American Soybean Association, said farmers will always find ways to grow more crops to stabilize prices. Though high prices are good for the farmers, there's bound to be a correction, he said.
"There's an old saying out on the farm that the cure for high prices is high prices."
I shudder to think how many ivy-league educated "journalists" worked their little heads off to come up with this conclusion.
Yes, not COULD, it WILL lead to higher food prices. We had a huge corn crop last year and food prices went up. Will keep going up. We’re taking our food and putting it in ourgas tanks. It’s idiotic.
Typical Washigton Liberal decision.. we must act now!!
Algore says we’re all gonna DIE!
The hell with the consequences!
Let’s blame Bush!
by the way.. what are they gonna do next year...
Boo Teddy at the Nationals opening...nah!
OUR FOOD, OUR FOOD, OUR FOOD IS ON FIRE!
WE DON’T NEED NO WATER LET THE ETHANOL BURN!
(Except for the billions of gallons used to produce the ethanol, of course.)
Where have these people been?
Didn't research that it would do this to our food prices before they attracted a bunch of farmers to grow corn for Ethanol. Grrrrrrrr....
A little research would have proved that the farmers should have grown switch grass for Ethanol, thereby not depleting the aquifers, enriching the soil, and not killing our food prices.
While Wheat and Soybeans have been tanking for weeks now, which is an excellent sign...
Look on the bright side. People will cut down on their food portions and lose weight. That will thrill the food nazis.
Not to the bought and owned politicians, of both parties, in congress and senate.
And maybe we can get that crappy high fructose corn syrup out of just about everything.
using corn in the US is
better than buying oil from ragheads
“There’s an old saying out on the farm that the cure for high prices is high prices.”
This may be barnyard economics but it is true. For laymen, what this means is that by raising prices you will cause consumers to buy/eat/consume less of something like corn. And when the high prices cause less consumption, the prices inevitably fall. And typically fall lower than where they were before they got high.
Unfortunately, corn prices aren’t likely to be dropping in the near future even IF we get a couple more million acres of corn planted (which is like shooting golden fish in a barrel at these prices). Because of the extra 1 BILLION gallons of ethanol Congress mandated to be produced in 2008 we are going to be using more corn for that than the extra corn being grown even if we had MORE acres of corn being grown in 2008.
The major factor in this is the government mandate here is preventing a true free market for corn, wheat, rice or soy. So we are seeing an artifically high price and the ability of people within the market to game the system more easily and the commodity traders are loving it.
I didn’t trade grains in 2007. But I have no choice but to do it now because I have to make up losses in other sectors where money is fleeing to get into commodity trading. In order to offset those losses, I have to take advantage of the mismanagement of corn, wheat and soy and make my capital gains in these trades. But to avoid contributing to the problem as much as I can, I’m shorting many of these high prices to help drive them back down to reality.
Wherever possible, I want to avoid making it harder for somebody who only makes $35,000 a year to be able to afford to buy both eggs and milk AND put gas in their car. Unfortunately, this is not something that can be said of Hitlery or The Obama since they both support subsidizing corn ethanol and driving up the cost of not just unleaded gas but also all corn based or corn fed grocery items. And that is not only sad but it’s also hypocritical of them.
Of all of the horrible things I can say about John McCain (I need a whole forum just for that), at least he is not on the ethanol lobby payroll. But he still believes in high gas prices throw energy taxes and no drilling.
You need to show longer term charts.
My wife will not allow me to buy any supermarket apple pie containing high fructose corn syrup. I am not a gourmet and I love the stuff.
I'll believe that.
On the other hand in the face of even higher prices for wheat farmers are ~~~~~~~~~~~~~~? Is this related to corn? Farmers planting more of one crop than another in order to get a better price? That's what farmers do, right?
Libs always wanted to keep the poor “down on the farm” anyway.
Tell me about it. we’ve got a bunch of RINOs/repubs in my state pushing for it because they or their relatives are in the ethanol refining business. Total conflicts of interest.
If the weather in the midwest doesn’t improve soon,there won’t be as much corn regardless.Farmers around here are already switching to shorter maturity hybrids(read that as reduced yield),or switching to beans.And with fertilizer nearing 1000 bucks a ton,I’m hearing more talk of reducing planting or just sitting this year out.
This will probably end up being a Fimbul Winter as far as fruit trees are concerned ~ but the South will make up for the shortage (except for apricot preserves).
If you get really panicked try fancy beans.
People better wake up. The Feds want to maintain "stable" prices. That means shortages.
The weather may be fine whereever you are but here it’s mega wet with more rain in the forecast.This time last year all wheat had been top-dressed -this year none has,not one acre!
As long as there is a dime of government subsidy to be had, but in the case of corn, they have killed the goose that laid the golden egg in many ways. They have driven the cost of fertilizer and diesel so high they can no longer come out and it is a better deal to take the government doll and not do the work.
I know that.
A 29.6% drop in wheat futures in 3 weeks is pretty significant, regardless of timeframe.
Higher corn prices will result in more corn production until supply and demand balance again.
Burning food is the stoooopidest liberal idea yet.
Dear Farmer Dean if you really have someone who is going to “sit this year out” please contact me. Of course it needs to be soon as planting time is here (or past or soon to be depending on your location) but I will offer them $1 per acre for a lease (100 acre min.). That’s better than they get doing nothing.
If you still have that issue, perhaps you would be good enough to send it along to Jorge Bush. I think his subscription expired before this issue came out.
Soybeans going down because cool,wet weather encouraging bean planting at the expense of corn. Wheat down due to expectations that crop failures of last years won’t repeat. Corn up due to bean planting up and corn planting down.
I think the coincidence of corn with oil is just that: coincidence.
Governor of New York dropped $85,000 on that one.
I noticed when I fueled up (first time in two and a half weeks) that the regular unleaded was touting up to 90% ethanol with a little green sticker. That crap pisses me off. I’ll look else ware or pay for mid-grade just to stay away. I refuse to contribute to the inflation caused by turning perfectly good food into energy via a multi-stage process that guarantees that fuel is being wasted and strains the wallets of the average person by increasing food prices. The same lie is being told regarding electric cars. First, the energy is likely delivered from a coal burning or natural gas power plant. Second, there is a great deal of energy lost in transmission in the form of heat, sound (note: that buzzing and crackling under the high-tension wires is energy being wasted in the form of both heat and sound) and mechanical conversion which involves both heat and sound. Finally, you dump the energy into an inefficient storage device which once again wastes energy itself charging and then delivering the energy by conversion through the wiring and stators to the drive train to create motion. In the end you get to pay to replace and dispose of a huge toxic battery at about half of the value of the transportation device (car) just to appease the itch in Al Gorical’s pants. All hail Gia and the wonders of stupidity. Real efficiency and love for mother earth is a potato(e)(oe)(oeoeooooooe) cannon custom formed to ones body and 1/4 cup of gasoline. Pour deadly fuel, insert self, tilt at a 45 degree angle for maximum efficient distance. Set to 25 degrees if you only intend to go to wal-mart. Enough.
I’m sure that anyone who chooses not to plant already has some renter lined up to pay the going rate locally.We are not planting corn this year,we intend to concentrate on our horse hay business and wheat.
“People better wake up. The Feds want to maintain “stable” prices. That means shortages.”
Just the opposite is true:
For the past 50 years or more the farm programs (really food programs, as they were designed primarily from the food available angle) have been carefully crafted and annually refined.
The final acreage allotments, price supports etc. arent put into place until the very last moment, so that the desired crop size can be more precisely met. The goal is to produce just enough excess food stuffs to keep the price down, but not so much as to drive too many farmers out of business in that crop cycle.
Price supports are in place so that farmers can count on a certain floor price for their crop, sort of a minimum wage. This money will allow them to plan to be in business for the next year.
Acreage allotments set by the USDA allow for a big crop, more than the consumers can use. As a result, there has always been a huge surplus hanging over the market, keeping prices down, sort of a maximum wage.
Imagine some guy standing in your bosss office asking for your job everyday, willing to work for just a bit less than you are. Not at the employment agency, but actually in his office. With that kind of situation, its going to be hard for you to ask for a raise, and its also hard for crop prices to rise significantly with the surplus.
Fifty years ago, when this was just beginning, a lot of farmer didnt enroll. As the years passed, these programs began to squeeze every farmer. It is now to the point where nearly every farmer in the United States is enrolled. Very few farmers have the financial resources needed not to enroll, because a particularly large crop can force prices so low they can be driven out of business within one crop cycle. That means that the government has control over nearly every aspect of crop size, how long the farmer will store his crop after harvest, and at what price he will sell it for.
All of the above is designed primarily to keep food stock supplies up, prices down, and food cheap for the consumer. Secondarily, its designed to keep farmers poor, so they will be forced to enroll in the program next year.
A quick trip through the Midwest, our breadbasket, will reveal the accuracy of the success of the Secondary target. Small towns, who rely on the financial earning of the farmers to survive are poor. A trip through the countryside will show farm families who live a very simple life. Im not asking you to feel sorry for any of them, anyone could move elsewhere. I did.
Ethanol has been the straw that broke the back of the cheap food train, but it could have been just about anything.
LOL! Depending on where the land is, of course, you are somewhere between $100 to $300 per acre short!
Gosh, I guess all those ag subsidies are keeping production down. /sarc
See post #41
Quite a strong resemblance over the past 6-10 months between corn and crude.
The price of fuel drives ag prices/food prices.
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We, quite correctly, predicted the economic problem ethanol would present, on top of the tax burden created by subsidizing this thoroughly useless field.
On top of that, I have yet to speak to a single environmentalist who hasn't pointed out that it's a horribly stupid idea that uses more energy than it saves. So, in this one case, the other side agrees with us, something I never thought I'd see.
So if we don't want it, and they don't want it... Why on earth are we using it?
A disturbing and enlightening peek into modern corn production.