By Karen Abrams
Is the era of
cheap food over?
Strike one resulted in higher food prices due to rising oil prices, strike two resulted in yet higher food prices as many brilliant economic minds in the US encouraged corn ethanol production to combat steady rising oil prices, strike three continues to play out as Iowa; America’s breadbasket state, responsible for 18% of the nation’s corn production struggles to rebound from the recent disastrous floods.
3 million acres or 16% of Iowa’s farmland is under water. According to MSNBC, this figure accounts for approximately 2 million acres of soyabean and 1 million acres of corn. The report states that Iowa is America’s number one producer of corn supplying approximately 18% of the nation’s corn and 17% of the nation’s soyabean. Guess what folks, don’t look for lower food prices anytime soon.
Corn as is well known, has become integral to the US and thus world diet. Not only is corn used to feed cows, pigs and poultry, but a derivative of corn called high fructose corn syrup can be found in the majority of sweetened products in the United States; from sodas, juice, cookies, cereal, breads and just about every processed and sweetened food we eat.
The prices for milk and dairy products like cheese, yogurt and ice cream brands have also been affected as the corn supply is interrupted.
According to the Business Times online, “prices for dairy products have also risen because of increasing demand from China and the Middle East along with the drought in Australia, reduced subsidies in the European Union and the rocketing cost of corn”. The Times goes on to state that, “this month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol”…consider these effects are all pre-flood effects.
The March 20, 2007 issue of Policy Economist online breaks down the 2006 uses of US corn production as follows; 50% on animal feed, 18% on ethanol, 18% on exports, 11% for food and industrial use and a tiny percent on seeds. With stunning growth projected for ethanol use and the recent effects of the Iowa floods, the US projects a need for further reduction of corn exports in order to meet local demand; that’s a potential 2.3 billion bushels of corn potentially out of world circulation over the next 5 years; experts say however that the more likely reduction is a steady decline to 1.7 billion bushels by 2009.
Consequently, prices for animal feed and corn derivative foods on the world market are projected to increase steadily. Since the United States dominates world corn trade, this means that corn prices are largely determined by supply-and-demand relationships in the U.S. market, and the rest of the world must adjust to prevailing U.S. prices.
A silver lining might be Argentina, the second-largest corn exporter in most years. Farmers there plant their corn after the size of the U.S. crop is known, providing a quick, market-oriented supply response to short U.S. crops. Several countries—including Brazil, Ukraine, Romania, and South Africa—have had significant corn exports when crops were large or international prices attractive. The world’s corn supply is projected to be so short of demand however that the effects of increased production by other world players will still not keep up with demand as ethanol production continues to soar.
The plain truth is that we now all have to adjust to higher world food prices. For developing countries, an increasing portion of household income will go to food production. In Guyana, we have embraced the “Grow More Food” project. Is growing more food going to be sufficient to ease the burden to the Guyanese people? I can’t say, only time will tell.
