If you’ve been watching the news lately you may have noticed some emphasis placed on the 2012 drought. For those of you who don’t quite understand, a drought is an extended period with no rain that can cause injury to plants and animals. What does this really mean to agriculture’s customers? In all actuality it means everything!
Many don’t see first-hand the damage caused by the lack of rain. But remember, just because you can’t see something doesn’t mean it isn’t there. This lack of rain has taken its toll on the agriculture industry, from the livestock producer to the crop farmers who produce commodity grains and fibers such as corn, soybeans, wheat and cotton. Sure, but what does this mean for our customers?
Which foods will be affected?
The answer is all of them. As the price of grain continues to rise, so will the price of food. Grain prices in the United States drive our nation’s economy. These grains are not only used for our own consumption but also for all livestock in some manner. And if you didn’t already know, a vast majority of corn is utilized as a fuel alternative we know as ethanol.
If we have a good year next year won’t prices go back down?
This is not necessarily the case. Livestock producers across the nation are faced with life altering decisions this year. The majority of these decisions include selling stock and vacating the industry. Along with the rising grain prices, hay for livestock is following suit. With the limited amount of hay and grain available many ranchers are forced to sell their stock. This stock will then go straight to the feedlots and slaughter facilities, with a smaller portion to other ranchers in different regions to replenish herds that were affected by last year’s drought. More on a flooding cattle market can be found on Ryan Goodman’s Agriculture Proud blog that features CBS news coverage over the situation.
According to MeatingPlace the USDA market report released on 8/10/2012 predicts corn prices at $7.50 – $8.90 per bushel with corn produced for ethanol production down by 400 million bushels. Also, soybeans are projected at $15.00 – $17.00 per bushel. These prices are substantially higher than predictions made earlier in the year at almost unheard of prices.
So what do these prices mean to customers?
With grain prices of this magnitude, customers should see this taking a toll on their wallets at the grocery store checkout lines. US grains are a commodity that is a direct driver of our overall food supply. Some price increases will happen immediately such as foods directly utilizing commodity grains like wheat, corn and soy products, while others will take time. As the market becomes more and more flooded with beef we shouldn’t see a huge increase in beef prices for about a year. Likewise, many foodservice establishments are locked into market price contracts with their respective meat processors, so until these contracts expire, prices at restaurants and other foodservice establishments should remain pretty constant. After expiration of these contracts new market contracts will be adjusted so processors can remain in business, thus, higher prices.
Though not everyone sees the drought effects first-hand, they are real and out there. A drought of this magnitude will affect everything from clothing, food and shelter. So if you eat, shop and sleep with a roof over your head, the 2012 drought will have its effects on you too.