published Monday, August 13th, 2012

Food supplies in crisis

The current drought already has produced a rash of bad news — for the farmers it directly affects, for U.S. consumers who can expect to pay higher food prices in coming months, and for many developing nations that already find it difficult to pay rising costs propelled by precipitous declines in commodity supplies. The news got worse late last week. The U.S. government again cut its estimate of the nation's annual corn and soybean yields. "It's scary when you see the numbers ..." one analyst said.

There's reason for such pessimism. The Agriculture Department said Friday that the U.S. corn yield will be about 123.4 bushels an acre. If that proves the case, it would be the lowest in 17 years. In the same forecast report, the government put the soybean yield at 36.1 bushels an acre, almost 5 bushels an acre below last month's estimate. Wheat harvests will decline, too. Crop yields could fall even more, many experts say.

If that happens, the impact will be considerable. In July, Agriculture Department experts warned Americans that food costs would climb 4 to 5 percent next year. Given Friday's numbers, that scary estimate could rise. We'll know more on Aug. 24, when the department will provide updates of its price estimates.

Whatever the numbers then, it's a certainty that consumers will pay more in coming months for milk, meat and poultry, for baked goods and processed foods. Shortfalls in corn, a major component of everything from animal feed to the sweeteners used in processed foods, will produce a major bump in prices. U.S. consumers, already buffeted by a difficult economy, will be hard-pressed to meet the higher prices in many instances.

The same is true for global markets. The United States produces about 40 percent of the world's corn and soybeans, and about 20 percent of its wheat. Projected reductions in U.S. commodities will be costly for overseas customers.

More of what is harvested will remain at home. The much diminished portion of the crop available for overseas sale will be more expensive. That could lead to significant unrest. Food shortages in 2008, for example, prompted major protests and government crises in many developing nations.

While there's little than can be done directly about lower crop yields, there is one way to increase the availability of corn. The Renewable Fuel Standard, which became law in 2005, requires that much of the nation's corn crop — about 40 percent -- go to ethanol producers. The goal was to reduce greenhouse emissions and the nation's dependence on foreign oil, though there is considerable debate about the efficacy of the program on either count.

Given that, waiving standard ethanol requirements during the drought crisis, and perhaps beyond, makes sense. Doing so would increase the amount of corn on the market and reduce the rising pressure on food prices here and abroad. That won't end the crisis caused by the drought, but it would help ameliorate its harshest effects.

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EaTn said...

from above...."The Renewable Fuel Standard, which became law in 2005, requires that much of the nation's corn crop — about 40 percent -- go to ethanol producers."

This alone has contributed to the past increases of grocery prices; it now is a national disgrace that will send grocery prices out the roof. Where are our representatives and what are they going to do about this?

August 13, 2012 at 6 a.m.
joneses said...

EAtn

I agree with you. The Renewable Fuel Standard is something George Bush did to appease the environmental radicals to use less oil and the unintended consequences are higher food prices. This program is a failure.

August 13, 2012 at 7:52 a.m.
EaTn said...

joneses.....true that Bush wanted to appease the environmentalists, but even more he wanted to appease the big corporate farmers. Sad to say that Obama has followed right in these footsteps. The price we the food consumer has paid already is a sham, not counting the tax subsidies we've paid out for ethanol. Where is Alexander, Corker and our other state senators and representatives when we need them most?

August 13, 2012 at 8:18 a.m.
joneses said...

Where is Alexander, Corker and our other state senators and representatives when we need them most? Where is Hussein Obama and Harry Reid when we need them most? The democrats have controlled most of Washington DC for quite some time.

August 13, 2012 at 9:25 a.m.

In reality, without that law, farmers would be growing even LESS, because they know there's a relatively fixed market for their product. Why would they plant more than they can expect to sell? And they know their costs too.

So no, we wouldn't be saved from anything, there would just be less corn planted.

Besides, if you really want to reduce the impact of droughts and other such catastrophes, you'll want a long-term solution, not just a temporary stop-gap which won't do much.

Instead of being a bunch of grasshoppers, start thinking like the ants.

August 13, 2012 at 12:40 p.m.
EaTn said...

bulbs....even in the Bible they had enough sense to store crops in case of famine. At one time our govt stored essential food commodities like they do oil, but I doubt that be the case now.

August 13, 2012 at 1:06 p.m.

EaTn, I believe Ronald Reagan sold them off, in an attempt to privatize national interests in the name of profit.

Those right-wingers, always thinking of how they can make a buck off the government.

August 13, 2012 at 7:55 p.m.

HWNB, In the Hussein Obama/Soetoro U.S. people with ant-like attitudes toward preparedness are considered to be terrorists for the type of behavior you are endorsing. For shame! What would the golfer in chief think? Let's ask his teleprompter.

August 14, 2012 at 2:02 p.m.
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