Inquiring minds are watching the warnings of higher food prices headed for American supermarkets and restaurants were swallowed easily across much of farm country Wednesday. The Omaha World Herald reports that the bombshell came when the U.S. Department of Agriculture reported that global demand had pushed U.S. corn supplies to their lowest point in 15 years.
The price of corn, which has doubled over the past six months, affects most food products in supermarkets. It’s used to feed the cattle, hogs and chickens that fill the meat aisles.
It is the main ingredient in Cap’n Crunch and Doritos. Turned into syrup, it sweetens most soft drinks and many foods.
Corn also is part of the agricultural blend that fuels the economies of Nebraska, Iowa and other farming states. Iowa is the nation’s top corn-producing state; Nebraska is third.
It takes about 90 days for the price changes to make it to the consumer. Chicken is usually one of the first items to show the price increase due to their lifespan. After Chicken, prices on packaged foods should take six to seven months to rise. Finally, price hikes for hogs take about one year, while cattle takes two years:
Tyson Foods, the nation’s biggest meat company, said chicken, beef and pork prices are expect to rise this year, if only slightly, as producers seek to cover costs.
ConAgra Foods Inc. — the Omaha-based producer of brands including Healthy Choice, Banquet and Chef Boyardee — is raising prices on some of its products because of higher costs for corn and fuel, said Teresa Paulsen, a spokeswoman.
The price rally has bolstered the financial fitness of America’s crop and livestock operators over the past eight months. Midwestern cropland is yielding record values. Rural banks and equipment makers report record profits.
And economists might want to take note here…farmers are even now beginning to change there spending habits without worrying about low interest rates:
“We’re seeing record income levels for the ag community and … wealth accumulation that cannot be denied,” said Bruce Johnson, an agricultural economist at the University of Nebraska-Lincoln. “We’ve moved into a whole new level.”
Said Bruce Babcock, an agricultural economist at Iowa State University: “Farmers are going to be earning quite a bit more money.”
Jason Henderson, Omaha branch executive for the Federal Reserve Bank of Kansas City, said farmers are buying more tractors, pickup trucks, grain bins and land.
“And they also come to Omaha to shop and go to events,” he said.
Too bad modern economists don’t see how manufacturing and other ‘creative’ industries are the real engine needed to get us out of this recession. While Washington frets about the ‘consumer’, the creators of capital are begining to show signs of progress.
If only the government will keep out of their way this time.
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