Impact of a drought this year on your food bill
I was wandering around wondering about my grocery bills and I ran across this great piece from the UIUC Farm Gate. The summary:
“The relationship between corn, ethanol, and gasoline prices has resulted from the federal ethanol production mandates, and they will have an impact on corn prices particularly if a short corn crop results from weather issues. The reduction in production will raise corn prices to levels that ethanol refineries cannot afford to operate, and either the ethanol production mandates will have to be relaxed or refineries will have to be heavily subsidized to be able to buy corn at nearly $8 projected prices.”
This article really hits home with us because, of course, we worry about fuel prices, food prices and our environment. It appears as if La Niña is likely to cause some drought conditions in the U.S. this year, leading to higher corn prices. NOAA’s drought monitor seems to back this up.
Corn prices are also higher this year because of government mandates around ethanol and a generally “greener” focus on ethanol in our country. All of this comes together to push commodity prices up. That is, farmers who want a better crop to sell, will sell corn because of its higher price. That leaves less land available for wheat and soy beans, which also pushes their prices higher.
In the end, the combination of government mandated use of ethanol, our focus on corn-based ethanol and looming drought conditions mean higher prices for our groceries based on these commodities. Also, don’t forget that much of our corn goes to feed our beef.
Have you seen the effect in your grocery bill yet? Do you see any counter-trends?

