The steepness of the price rises can be breathtaking. The price of corn rose from $3.70 a bushel to $5.88 (almost 60%) in the time span from July 19, 2010 to November 1, 2010 and then stayed above the current price, $4.50 until the middle of 2014.
From the middle of 2014 until recently it wandered around between $3.50 and $4.00 a bushel.
What is critical to understanding is that farming is a high fixed cost business. Small movements in price result in large changes in net profit or loss.
Unless, of course, you are one of the farmers who has not product to sell because you got washed out or drought killed your crop.
From a consumer standpoint, $8 corn makes for expensive pork and chicken but if your only concern was to eat enough calories to live, $80 would buy you 3000 Calories a day for a year.
Rain has killed a LOT of corn this year.
ReplyDeleteIowa, Nebraska, Kansas, Missouri and Im sure many other states ( just hitting the ones I know personally) have huge areas still flooded. I read somewhere that up to 6 Million acres likely wont get planted this year. A lot of farms and small towns are Still ( or in many places again ) flooded. Some have flooded multiple times because just when they start to dry out it rains upstream and/or they release water from upstream dams. I know one small Iowa town where the fire Dept has flooded 5X. Places that NEVER flooded in memory EVER. Many have just given up.
ReplyDeleteSo, Food prices ARE going to rise. As corn and Soy Bean prices rise beef and pork producers will likely be tempted to sell most of their animals at any price. ( Because their costs are fixed they cant afford $8 corn.) Also, the govt now mandates ethanol go into gasoline...so ethanol will continue to be made driving prices of corn and gas both up. Now here's one I bet most haven't thought of but those who live near the Southern Border SHOULD know. Many Mexicans live on pennies to a few dollars a day. When corn prices go up...they cant afford corn for tortillas. If corn prices double it will be life changing for very many on both sides of the border. For those on the US side think about buying a really big freezer and filling it now.