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TCPB: Small portion of rising food prices related to cornTexas Recent increases in food prices at the grocery store have led many to incorrectly place blame on higher corn prices. According to a recent study released by the Texas A&M Agricultural and Food Policy Center, Effects of Ethanol on Texas Food and Feed, the price of corn has had an insignificant influence on rising food prices. The study found that in 2004 when the price of corn was $2.06 per bushel, the actual farm value of corn in a 12-pack of soda was 11 cents. In 2007 when corn prices were at $4 per bushel, the farm value of corn in the same 12-pack was still only 22 cents, which is less than two cents per 12-ounce can of soda. Even at today's corn prices, there is still only about six cents worth of corn in an 18-ounce box of corn flakes. The primary reason for escalating food prices are $100-plus crude oil. A $1 per gallon increase in the price of gas has three times the impact on food prices than a $1 per bushel increase in the price of corn. The remaining cost of food items is attributed to packaging, advertising and other non-farm related costs that are handed down to the consumer. According to the U.S. Department of Agriculture's Economic Research Service, actual food inputs, or farm value, account for only 19 cents of every dollar of processed food, less than half of what it was 30 years ago. Texas Corn Producers Board Vice Chairman, Steve Yoder of Dalhart, said corn has had little to do with rising food costs. "When corn is $2.50 per bushel there is five cents of corn in a one pound package of corn chips that cost $3.29," Yoder said. "When you double the price of corn, you have only a five-cent increase that you can attribute to the price of corn. Labor, transportation and energy costs have played a much larger role in the increased cost of food." While corn prices have remained high, the actual return to the farmer has not increased due to the cost of production. Corn producers are now operating at a higher risk than ever before. Waxahachie, Texas, corn producer, Scott Averhoff, who is the Texas Corn Producers Board chairman, said producers are still getting the same share as they did before food costs began rising, while their inputs keep rising, as well. "Producers still face the uncertainties of weather and market volatility, but at a much greater cost," Averhoff said. "Operating lines have certainly been strained with the added cost of production." The A&M study states the cost of production ranges from $200 to nearly $800 an acre in the different corn production areas of Texas. In some areas, producers need corn to be at least $4 per bushel to break even after fuel, labor, fertilizer and other input costs. "With increased fuel costs and increased inputs for crop production caused by higher energy costs, the price of corn had to increase or farmers would have been forced to not grow it," Yoder said. "You can't continually grow a crop below the cost of production and stay in business." The A&M study reported the overall cost of production for farmers has increased substantially in the past couple of years. Fuel and irrigation energy costs have increased 37 percent, mixed fertilizer costs have jumped 45 percent, seed has risen over 23 percent, and interest is up 18 percent. Corn production requires the use of fertilizers, such as anhydrous ammonia, urea and potassium chloride to produce sufficient yields. The A&M study reported anhydrous ammonia increased 20.5 percent from 2005 to 2007. Urea increased 25.1 percent from 2006 to 2007, and potassium chloride has increased 84.2 percent since 1998. In the spring of 2004, Yoder spent $146 per ton on the potassium chloride he applied to his corn crop. However, since last spring the cost rose from $300 to $638 per ton. Yoder also saw anhydrous ammonia increase from $345 per ton in 2007 to $660 per ton in 2008, and liquid ammonium phosphate jumped from $285 to $852 per ton since last spring. 5/5/08 Date: 5/1/08 Advertisement
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