Corn prices affecting poultry sooner than expected
The price of corn has surged to US$4 a bushel, up from
US$2.50 in September, largely because of the ethanol industry's building boom.
20% of the corn crop is already being used fuel.
At the wholesale level, broiler chicken prices already are up 10% in the
last two months. If corn stays above US$4 a bushel, consumers can expect higher
chicken prices first, followed by higher pork and beef prices. The ethanol boom
will affect prices of wheat and soybeans, too, because farmers will grow corn on
acres once devoted to those crops.
Although effects within the US may be limited, they can be severe in poor
countries. In Mexico this month, the government had tortilla producers agree to
cap tortilla prices, which were rising with the cost of corn imported from the
Pat Westhoff, from the University of Missouri's Food and Agricultural
Policy Research Institute, thinks there's a limit to how high ethanol can drive
corn prices. Ethanol producers are seeing their profit margins squeezed. At some
point, producing more ethanol will become uneconomical and expansion projects
will be shelved.
In the meantime, however, a wet spring, or a drought this summer, might
send corn above $5 a bushel, a level it hasn't touched since 1996.
To comment, login here
Or register to be able to comment.