Less Corn Could Mean Higher Food Prices

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.

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."

“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. aren’t 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 boss’s 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, it’s going to be hard for you to ask for a raise, and it’s also hard for crop prices to rise significantly with the surplus.

Fifty years ago, when this was just beginning, a lot of farmer didn’t 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, it’s 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. I’m 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.

I am thoroughly baffled as to why we are using corn for ethanol. We use corn for everything, and we decided to use it for something new as well?

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?

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