When Corn Prices Rise 50%, Expect Food Prices to Climb 1%

Michael Dorausch/CC BY-SA 2.0

Consider this very interesting passage from The Guardian, taken from a recent piece (one of many) on how badly things are going for farmers in the Midwest and Plains due to the heat, drought, general state of extreme climate weather weirding:

The 12% cut in the yield forecast is the largest in memory and reignited a rally in grain prices. Corn on the Chicago Board of Trade initially jumped 23 cents and later settled to a 15¢, or 2% gain, to $7.76 a bushel. Prices have climbed 34% in the last month. ... Plunging corn yields are likely to push up meat prices, as corn is used to feed cattle. Meat prices were already rising and were expected to stay high after last year's drought in Texas forced many ranchers to scale back their herds. Corn is also used as an ingredient in corn flakes, ketchup, bread and fizzy drinks, although it accounts for a small fraction of their costs compared to transport and marketing. Food prices typically climb about 1% for every 50% increase in average corn prices, said Richard Volpe, a USDA food markets research economist.

1) As a practical matter that 1% figure is a good one to remember, when taking in current and future news pieces about changes in crop prices and crop yields.

But, 2) For crying out loud, talk about another concrete example of how much the modern American diet and agricultural system is tied to corn—every time corn prices go up by half, food prices in general go up 1%.

The original piece notes that official US government projections expect food prices to go up 3.5% this year.

Tags: Agriculture | Corn | Global Climate Change | Weather

WHAT'S HOT ON FACEBOOK