Historic Surge in Grain Prices: This year the prices of Illinois corn and soybeans are up 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. And a growing number of economists and agribusiness executives think the run-ups could last as long as a decade, raising the cost of all kinds of food.
As I said before here, and here, and here -- the only way ethanol is cost competitive with gasoline is through government subsidies... and if you burn your food for fuel, you'll end up paying too much for both
Not only have prices remained high, but the rally has swept up other commodities such as barley, sorghum, eggs, cheese, oats, rice, peas, sunflower and lentils. In Georgia, the nation's No. 1 poultry-producing state, slaughterhouses are charging a record wholesale price for three-pound chickens, up 15% from a year ago.
What's changed is that powerful new sources of demand are emerging. In addition to U.S. government incentives that encourage businesses to turn corn and soybeans into motor fuel, the growing economies of Asia and Latin America are enabling hundreds of millions of people to spend more on food. A growing middle class in these regions is eating more meat and milk, which in turn is increasing demand for grain to feed livestock.
Hang on to your hats, Ladies and Gentlemen, and look for the recession/inflation to come:
American families, which spend 9.9% of their disposable income on food, are facing the fastest-rising food prices in 17 years. The consumer's cost for everything from yogurt and popcorn to breakfast cereal and fast-food french fries is climbing. In U.S. cities last month, the average retail price of a pound loaf of whole-wheat bread was up 24% from a year ago, according to the Bureau of Labor Statistics. Whole milk hit $3.807 a gallon, up 26%.
The winners, and I don't begrudge them a dime, are the American farmers who are likely to see their income go up nearly 50%.
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