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Cost of energy outpaces impact of corn on food prices
NEBRASKA Some people have tried to blame the slightly higher prices they are paying for food on the grocery store shelf on the higher prices farmers get for their corn. There are other factors involved, however, including the high cost of energy, which affects every company that has groceries on a store’s shelf.“High energy costs add to the expense of processing and packaging everything, even a box of corn flakes, and then getting that food to the store,” said Randy Klein, director of market development for the Nebraska Corn Board. “Yet, higher corn prices driven by demand for consumer products such as milk, pork and ethanol, seem to take the brunt of the blame in many cases, without any reasonable explanation.” Research has shown that a $1 per gallon increase in the cost of gasoline has three times the impact on food prices, compared to a $1 per bushel increase in the cost of corn, Klein said. “Although some food companies have tried to blame corn for their price increases, many now acknowledge that higher energy costs play an important and significant role,” he said, “and many of these same companies continue to have nice profits.” Using a box of corn flakes as an example, Klein said if corn is priced at $3.50 per bushel, there is only 3.9 cents worth of corn in a 14-oz. box of corn flakes that sells for $2.79. Conceivably, he said, the higher corn prices this year could have raised the price of that box of cereal 2 cents. “If my family has to spend a few cents more at the grocery store for safe and abundant food, that’s fine. What’s difficult is paying about $30 more each week to fill up the family vehicles than I did just a few months ago,” said Cindy Johnson, a mother of two from Grand Island. “That’s equal to an entire bag of groceries—every single week.” Johnson is also executive director of the Grand Island Area Chamber of Commerce. Klein said corn producers, although frustrated that corn and ethanol are sometimes blamed for higher food prices, know that ethanol is helping meet the country’s demand for fuel. “Can ethanol solve all our nation’s energy challenges? No, but it is helping—and it’s available today,” he said. “One of the best things is that the money we spend on ethanol stays right here in the United States—in Nebraska,” he said. Klein said that’s something many consumers appreciate. “To me, keeping that money here is worth every penny,” said Johnson. “Even a couple of cents extra for our box of corn flakes.” Another fact worth noting, according to Klein, is that there is plenty of corn for this year and next. “The latest projections estimate that the corn supply through next August is about 14.5 billion bushels, while demand is 12.6 billion, including ethanol, exports and animal feed use,” he said. “The big boost in supplies is due to this year’s good crop, which leaves a nice cushion going into harvest next fall.” The Nebraska Corn Board is a self-help program, funded and managed by Nebraska corn farmers. Producers invest in the program at a rate of 1/4 of a cent per bushel of corn sold. Nebraska corn checkoff funds are invested in programs of market development, research and education.
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