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Drought may lead to higher prices

Drought may lead to higher prices

Farmers still receive fraction of food costs

July 20th, 2012 in News

A searing drought in Central Missouri and throughout much of the nation has severely damaged corn and soybean crops, prompting concern by consumer groups that the price of food soon may be going higher because of expected grain shortages.

John Anderson, a Farm Bureau economist, said most of the food dollar can be traced to the cost of transporting, processing, manufacturing, marketing and packaging of food products.

Current corn-based grocery items are made from last year's crops. Wheat was harvested in Missouri about mid-June, before extreme heat and drought hit the state.

"The lag between production and actual retail process can be very, very long and a lot of things can happen to muddy the water," Anderson said. "In general, drought is a difficult circumstance to deal with and it will reduce production of some of these items."

Declining supplies, he said, are likely to increase the cost of transporting items that were impacted by the drought for greater distances. Corn commodity prices are up about 25 percent this month. On Thursday corn commodity prices shot up to $7.77 a bushel.

The actual grain, meat and milk products produced by farmers represents only a small portion of actual food costs, Anderson said. For the last 60 years, the farmers' share of retail grocery staples has declined as farm operating costs have increased.

Gale Lush, chairman of the American Corn Growers Foundation, said Thursday farmers are being blamed unfairly as the reason food prices will rise.

"Only 200 million bushels or 1.5 percent of the 2011-12 marketing year's 13.5 billion bushel corn supply will be used in the category of Cereals and Other Products according to June reports from the USDA. The farmer's share is only 9 cents of a $4.19 box of cereal."

The Missouri Farm Bureau points out that farmers receive only about 16 cents of every dollar consumers spend at grocery stores for food.

Diane Olson of Jefferson City, director of promotion and education for the Missouri Farm Bureau, said the discussion of potential food price increases because of the drought comes just after food prices declined in Missouri during the period from April through June of this year.

The Farm Bureau's quarterly Marketbasket Survey monitors the price of 16 food items that represent a cross section of agricultural products.

State and national retail food prices monitored by both the Missouri Farm Bureau and the American Farm Bureau throughout the rest of the nation revealed a decline in food prices.

The April through June total cost of the 16 food staples in Missouri was $45.60 - down $1.27 - compared to $46.87 during the first three months of this year, Olson said.

Of the 16 survey food items, nine cost less and seven cost more than the previous quarter. The only consistency was at the dairy counter where all items - eggs, milk and shredded cheddar cheese, were lower in price.

The meat counter found higher prices in Missouri for ground chuck, chicken breasts and bacon. But prices of sirloin tip roast and sliced deli ham declined.

Overall, Missouri grocery prices were 98 cents higher than for the same items a year ago, but $5.31 less than the national average of $50.91.

According to the United States Department of Agriculture (USDA), farmers receive only $0.15 for a pound of sliced bread selling for $3.79.