Consequences
Well, all that rushing to produce ethanol has already caused China to suspend production because of skyrocketing food prices. Guess who else is experiencing those skyrockets?
Americans. Get ready for $5 per gallon milk, it will be here by the end of summer.
"Prices are incredible," says Suzanna Wyman, shopping Monday at Shaw's Supermarket in Boston's Back Bay. "Milk, I heard, is going up even more…. I love fresh peppers and vegetables, but they're too much. Cereal is very expensive compared to what you used to be able to get it for."
The reason people are smarting: Inflation in grocery aisles is up by more in the first six months of 2007 than in all of 2006. That means food costs are on track for the biggest annual percentage hike since 1980, according to the Labor Department. The anticipated 7.5 percent increase would readily outflank the 2.6 percent core inflation rate to date, which excludes food and energy. It's across every grocery aisle, too, from burgers to bagels, from duck to dumpling.
Added to sticker shock at the gas pump, high food prices, especially for meat, are forcing consumers to scrimp, coupon-clip, and ponder the possibilities of a deep freeze to take advantage of discounts, says Boyd Brady, an extension agent at Auburn University in Alabama.
"There's a … combination of higher demand, natural disasters, higher energy prices – just a myriad of factors driving what price increases we're seeing across the food sector," says Chad Hart, an agricultural economist at the Center for Agricultural and Rural Development in Ames, Iowa.
The chief culprit is corn, namely No. 2 feed corn, the staple of the breadbasket. In answer to President Bush's call for greater oil independence, the amount of feed corn distilled into ethanol is expected to double in the next five to six years. Distillation is already sucking up 18 percent of the total crop. The ethanol gambit, in turn, is sending corn prices to historic levels – topping $4 per bushel earlier this year, and remaining high. All of this trickles down to the boards at the Chicago Mercantile Exchange, affecting the price of everything from sirloin to eggs (which are up, by the way, 18.6 percent across the nation).
There are a lot of factors here, but the main one - and the one that will keep prices rising rapidly, is the corn. And that, of course, is a direct result of the push for ethanol - and the subsequent massively inefficient energy overhead of that product. It is very likely that the massive energy overhead involved in ethanol production is also helping keep the price of gasoline high. There is a lot of corn farming and plant construction going on right now - both requiring a lot of fuel. So it is a double whammy on consumers, food and energy. And who is hurt the worst? Those least able to afford it, of course.
For some consumers, it's tough to hang on. In Savannah, Ga., the Salvation Army expects to serve 10,000 more meals this year because of high food prices. Americans are coping, too, simply by food shopping less often. Their average number of grocery store trips each week dipped below two for the first time since the Food Marketing Institute began its annual survey.
"You could get culture shock coming into this place, and it's not getting better," says Richardson Daniel, a longtime resident of Boston's Roxbury neighborhood, swooping into Shaw's.
This will become a great deal worse, folks. Bank on it.
Economy, Energy, Environment | Gaius Wednesday, 13 June , 2007
Other Links to this Post
-
Maggie's Farm — Wednesday, 13 June , 2007 @ 5:13 pm
By feeblemind, Wednesday, 13 June , 2007 @ 1:29 pm
You can squawk all you want about food prices. I think my grocery bill has gone up 20% this year. But spare me the talk about people not being able to afford groceries. People are driving more than ever. Restaurants are jammed everynight. Fact of the matter is that Americans spend a smaller percentage of their income on food than anyone else in the world. A dollar a bushel rise in the price of wheat will add less than two cents to the cost of a loaf of bread.
By jpg, Wednesday, 13 June , 2007 @ 3:04 pm
The flip side to the ethanol joke is that your gas mileage is about 20 percent less using ethanol based gas. So you need to buy more fuel to go the same distance as non-ethanol gas. Somewhere, Joseph Heller is laughing. JPG
By Quilly Mammoth, Wednesday, 13 June , 2007 @ 9:32 pm
TANSTAAFL. The choice is what you have to pay. Personally, I prefer Nukes.
By Ken, Monday, 2 July , 2007 @ 9:06 pm
The manufacturing guys over at Evolving Excellence just posted an interesting viewpoint on the “excess of corn”… tieing it to “an obesity of waste,” whether that’s a waste of overproduction or overconsumption. Ethanol or food.
http://www.evolvingexcellence.com/blog/2007/07/the-obesity-epi.html
Ken