Corn Prices vs. Food Prices

Just the FACTS here such as info posted in any of the other forums that would be useful for reference for CONSERVATIVE talking points in the future.

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Corn Prices vs. Food Prices

Post by tattulip » Thu Jul 17, 2008 4:19 pm

Record corn prices are having little effect on your food cost. The production of ethanol has little effect on your food cost.

http://www.ncga.com/news/ourview/pdf/20 ... NDFuel.pdf

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Post by College Boy » Thu Jul 17, 2008 4:31 pm

My childhood was full of lectures about how good milk is for you delivered by chubby dairy princesses.

-Mike

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Post by photoman59 » Thu Jul 17, 2008 5:01 pm


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Post by tattulip » Fri Jul 18, 2008 7:42 am

If corn prices are sustained in the $3.50-4.00 per bushel range, prices for cereal and
bakery items—such as corn flakes and corn chips—are likely to cost an average of 1
percent more annually between 2007-2009 than they would have without the corn price
increase, according to the AES study. This is because the cost of food inputs represents
just 4 percent of the retail price for these items. The AES analysis projects similarly
inconsequential inflation for fats and oils and sweeteners.
• If corn prices are sustained in the $3.50-4.00 per bushel range, grocery items that are
more sensitive to the cost of corn as an input—such as meat, dairy, and eggs—would see
the greatest increases, but even those gains would be relatively minor. The following
examples from the AES study show projected prices for several common items if corn
prices stay in the $3.50 per bushel range:
o If pork chops would have cost the consumer $3.66 in 2009 without the increase
in corn prices, the retail price might now be $4.06 if corn prices stay in the $3.50
per bushel range.
o If a gallon of milk would have been priced at $3.36 per gallon in 2009 in the
absence of higher corn prices, it might now sell for $3.88 per gallon if corn prices
stay at $3.50 per bushel.
o Large eggs that would have cost $1.17 in 2009 without an increase in corn prices
might now cost $1.41 if corn prices remain at $3.50 per bushel.

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Post by tattulip » Fri Jul 18, 2008 7:49 am

The GROCERY MANUFACTURERS ASSOCIATION has funded a public campaign "food before fuel" and have been promoted via falsehoods regarding food price increases, starvation and environmental concerns.

Don't buy into it folks!

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Post by hjpt » Fri Jul 18, 2008 9:57 am

I have to back tat on this one. One common misconception is that because corn prices are up, that farmers are shifting all available land into corn production. Not true. In fact, the number of acres in corn is slightly above the average from the 1980s. There is a sharp increase since the late '90s, but that's because corn was slightly over $1 per bushel.

One difference, however, is that using roughly the same number of acres, the corn production is way up due to increased yield. On average, the yield in the '80s was right around 105 bushels/acre. Now it's 150.

To say that corn based ethanol is to blame for high food prices is an ignorant oversimplification. I was going to type out an explanation, but this article from the Baltimore Sun:
Food prices are growing, but farmers' share of the profit is not
On the Farm -- Ted Shelsby
By On the farm Ted Shelsby
May 25, 2008
1 2 next Don't blame the farmer for the biggest increase in food prices in nearly 20 years.

The farmer's share of the retail food dollar is about the same today as it was in the 1970s.

Take corn, for example. According to economists at the American Farm Bureau Federation, the farmer receives less than 8 cents for the corn used in an 18-ounce box of corn flakes selling for $3.30 at the grocery store.

It is pretty much the same for a loaf of bread. The farmer receives about 16 cents from a loaf of bread that sells for $1.78.



The farmer's share of a 5-pound bag of flour costing $2.39 is $1.10.

So, what's the driving force behind rising food prices?

The rise in the price of oil - which has Maryland motorists paying more than $3.70 a gallon for regular gasoline at many stations - is a major culprit.

"Higher oil prices affect much more than just the cost of driving; they are actually one of the major factors behind higher food costs," Ed Schafer, secretary of the U.S. Department of Agriculture, said in a news conference on Monday.

"For food products, higher oil prices mean higher costs of transportation, processing, packaging and distribution, and all the other intermediary steps that bring commodities from the farm gate to the retail store," said Schafer.

He added: "Those steps account for approximately 80 cents of every retail dollar that is spent on food here in the United States."

On a much larger scale, the increased use of corn in the production of ethanol accounts for only 3 percent of the more than 40 percent increase in world food prices this year, according to Schafer.

The United States, as well as other nations around the world, is developing biofuels, including ethanol, to reduce their reliance on oil.

Their steps are already posting some results. According to the International Energy Agency, the biofuel production in the U.S. and Europe over the past three years has cut the consumption of crude oil by 1 million barrels a day. That saves more than $120 million per day, Schafer said.

In a breakdown of the consumer food dollar, Joe Glauber, the chief economist at the USDA, said 19 cents is attributed to the farm value of commodities.

He said labor accounts for 38.5 cents; advertising and packaging, 12 cents; transportation and energy, 7.5 cents; and other costs equal 23 cents.
More.

It's easy to confuse correlation with causation, especially when both food prices and ethanol are in the news.

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Post by photoman59 » Fri Jul 18, 2008 10:10 am

One common misconception is that because corn prices are up, that farmers are shifting all available land into corn production.
There is also the other case: corn for other uses (animal feed, cornsyrup, etc.) is instead being burned for fuel.

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Post by hjpt » Fri Jul 18, 2008 10:32 am

photoman59 wrote:
One common misconception is that because corn prices are up, that farmers are shifting all available land into corn production.
There is also the other case: corn for other uses (animal feed, cornsyrup, etc.) is instead being burned for fuel.
Luckily, in the last few years there has been record corn inventory (read - not consumed) the highest in the last 20 years, so the two ends need not compete for the corn. It's not an either/or proposition. At the end of last year, there were corn inventory of 10 billion bushels, up from 8.7 billion bushels in 2006. That's an inventory increase of 1.3 billion bushels. Over the same time period, corn demanded for ethanol only increased by 575 million bushels. It seems to me that the corn producers are producing more than enough to meet all demands.

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Post by tattulip » Fri Jul 18, 2008 10:50 am

And every bushel of corn (56 lbs) processed for ethanol, produces 18 pounds of distillers grain which is then made into animal feed. So 1/3 of the corn used for ethanol is still producing animal feed.

And it's not just ethanol that is driving up corn prices - it's also the cost of producing the corn which is a result of the oil prices. Farmer's aren't making money hand over fist on this deal because herbicides, fertilizers prices have reason along with the price of corn.

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