Agriculture/corn/soybean price effects on grocery costs (grocers)
- Category: Food Prices
- Last Updated on Sunday, 29 July 2012 15:49
- Written by Seraphim
According to the USDA, for the week ending July 1, 2012 only 48% of the corn crop (across the 18 major states) is in good to excellent condition, down from 56% the week ending June 24, 2012 and down sharply from 69% the previous year (July 1, 2011). A direct result of the worst drought to hit the midwest in more than two decades, over the last week, only 8% of the corn crop was in excellent condition compared to 17% in 2011. This is significant because the United States is the world's breadbasket; The United States produces 40% of the world's corn crop. Corn acreage is still at a 70-year high of over 95 million acres.
Although ethanol can be made from other sources, today more than 90% of it is produced using corn. High corn prices are severely affecting profit margins and that's causing some ethanol companies to temporarily halt production.
Between June 1 and July 11, 2012 the price of corn rose 28% to $7.04 a bushel. It has been at a 4-year high for just the last couple of weeks (corn futures are at a 10-month high). From June 29 through July 11, the price went from $6.70 --> $7.04 a change of 5.07%. Also affecting prices and demand for corn is the fact that production estimates are down 1.8 billion bushels in just the last month (14.8 --> 13.0) or 13.7% an acre (166 --> 146). In 2011 14.9 billion bushels of corn were produced meaning that at the newly adjusted 2012 forecast, corn production may be down as much as 12.75% year over year.
corn: 1 tonne = 39.3680 bushels; soybeans: 1 tonne = 36.7440 bushels
In three of the four leading producing states of Iowa, Nebraska, Minnesota (account for more than half of US corn production) the corn crop is in an overall better condition verses the other 15 states; Minnesota: 82% of the crop is in good to excellent condition, Iowa 62%, Nebraska 56%. The #2 state of Illinois is faring very poorly; exactly half (50%) of the crop is in either very poor or poor condition while 41% of the other 50% is just fair.
Corn Prices Affect Meat Prices
Corn is an important feedstock for cattle and so when the price of corn gets too high, farmers begin thinning herds; There are 92 million cattle which is the lowest level since 1952. In 2011, beef prices were up +10% and are expected to go up at least another +5% in 2012 but that forecast was made earlier in the year when conditions were better.
States With The Best Condition Corn
Corn in excellent shape: Pennsylvania (26%), Minnesota (19%), Iowa North Carolina and Texas (all 13%). Just think, last year at this time the overall average was 17% and now it's 8% with a median number of 4% (half of states are 4% or lower).
Late July 2012 update courtesy of NBC