By Katie Spoden
On Tuesday, the New York Times published an article describing the far-reaching consequences of the severe drought on food prices in the United States. The article summarizes the economic consequences of the drought due to the largely damaged corn and soybean crop in the Midwest.
A desperately dry corn field completely damaged in Nebraska. (Photo credit: Nati Hamik, Associated Press)
The U.S. Drought Monitor recently declared that 88 percent of this year’s corn crop and 77 percent of the soybean crop is affected by the severe drought. Classified as the worst U.S. drought in fifty years, damaged corn and soybean crops will affect the prices of many more foods at your local grocery store. Corn, used in an enormous amount of products – as syrups, starches, and sweeteners – also constitutes the majority of feed for livestock. Nearly half of all corn production is used as livestock feed. Soybeans are also used in some animal feed and as dairy alternatives.
Because of lowered supply, corn is selling at $8 a bushel, a 50 percent increase from June prices. Soybeans are now selling at a record high of $17 a bushel, up four dollars from May. The increased prices may benefit farmers in the short run, but consumers will experience the aftermath of price increases in the form of more money spent on poultry, beef, pork and dairy products – the recipients of corn and soybean feed. Most immediate, poultry prices are expected to rise 3.5 to 4.5 percent due to their faster growth and therefore more sudden response to higher feed prices. It is estimated that by November, dairy products will increase 3.5. to 4.5 percent, with eggs increasing 3 to 4 percent. Cost of beef is expected to increase 4 to 5 percent and pork 2.5 to 3.5 percent.
Prior to the drought, the United States Agriculture Department had estimated the 2012 growing season would produce a record high corn harvest. Currently, 45 percent of the corn crop and 35 percent of the soybean crop is rated poor or very poor. Despite major reductions in production, agricultural economists do not anticipate a major economic crisis for farmers due to the large crop insurance programs funded under the Farm Bill.
Read the New York Times article, “Severe Drought Seen as Driving Cost of Food Up,” here.
Katie Spoden is a research intern with the Nourishing the Planet project.