Rising food prices – The end of cheap grain

September 28, 2007

Rising Corn, Soybean and Wheat Prices Are Driving Up Food Costs

The price of every major grain crop is rising — in some cases to record levels — and one analyst quoted by the Wall Street Journal said there’s no end in sight. Two underlying issues are causing the price spike: extreme weather knocking down crop yields (in some cases because of events some link to global warming) and government subsidies for vegetable-based alternative fuels (which divert food and feed stocks to fuel).

Neither underlying condition is expected to end anytime soon.

“The days of cheap grain are gone,” the Journal quoted Dan Basse, president of AgResource Co. as saying.

Poor wheat crops — particularly in Europe and Australia — sent wheat futures to record-high prices yesterday.

That alone would drive up a variety of food prices — from packaged baked goods to bread to everything that contains wheat gluten. Just ask anyone with Celiac disease how hard it is to find gluten-free food, and you’ll know how pervasive an ingredient it is.

But it isn’t just wheat.

Corn prices have been hovering at, near or above record levels for months, despite a near-record acreage planted in the United States. That’s because a great deal of that corn is being diverted not to food or feed, but to fuel, as farmers follow the money trail set out for them by Congressional subsidies for the alternative fuel, ethanol.

Soybeans — another biofuel crop — are rising in price too, as are, according to the Wall Street Journal, barley, sorghum, eggs, cheese, oats, rice, peas, sunflower, lentils and even chicken.

Try and make a meal without using any of those products. Good luck.

But while American shoppers will feel a pinch — we already spend nearly 10% of our disposable income on food — the greater concern is mass starvation that could result as the world’s poor find it harder and harder to afford food.



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