July 18, 2012

MORE ON THE DROUGHT AND FOOD PRICES: Reader Peter Behlen writes:

I farm in western Minnesota where we’re still hanging in there with decent crops though we haven’t had rain for a month. Just because it doesn’t match the drought of the 1930′s doesn’t mean it isn’t dry. The biggest problem is where it’s dry. Right in the corn belt. Corn is above $7.00 and will most likely continue to rise. Price increases for food are inevitable I think. There’s even been talk of eight to ten dollar corn which would be a disaster. Most of us don’t want corn to run that high since it would have many undesirable effects. Anyway, the drought is real and may be coming to a grocery store near you.

Time for more strategic shopping. And Spam!

UPDATE: Farmer/reader Bart Hall writes:

Here in eastern Kansas the corn crop is pretty well a goner, browned off with empty ears. A dry lightning strike could set of one hell of a fire. Trees are dying; these days they’re competing vigorously for the attentions of our four dogs. Any President with half the common sense of a fencepost would issue an Executive Order immediately suspending all fuel ethanol production, but Obama doesn’t have that much sense, and besides he’s long since been bought by ADM, by far the nation’s largest ethanol producer and (ever since his campaign for the Illinois state senate) at or near the top of Obama’s contributor list. Cronyism is sometimes the things that DON’T happen, and I’ll guarantee that ADM has long since contracted its entire corn feedstock supply at vastly lower prices. Farmers will have to purchase 10-dollar corn to fulfill a 4-dollar contract, and it will destroy them.

On our own farm (we grow vegetables and alfalfa) it’s not just the drought, but the unrelenting triple digit heat. Last Thursday, when it was 109 F in the shade here, I took a meat thermometer out into our cucumber field. The internal temperature of those cukes was 162 F — well done for beef. By the next morning many were split, having obviously exploded because they got to boiling and their water turned to steam. It’s going to be a long, desperately difficult year, but I guess because I refuse to take government subsidies I don’t deserve to succeed.

Ugh.

ANOTHER UPDATE: Reader Brett Law writes:

I haven’t seen it getting a whole lot of attention, but the August 2012 spot price for fuel ethanol is $2.65 today. It was $2.20 two weeks ago. A number of ethanol plants have been temporarily closed due to rising prices. Gasoline, unsubsidized has been trading at $2.70 – $2.90 per gallon wholesale for most of the summer. These streams look likely to cross in the near future. This is interesting because at some point the “cheap” ethanol that is in our gasoline may become the floor for gas prices.

Well, at 10-15% ethanol, I’m not sure how big an impact this will have, but it won’t help.