Corn is Cheap No More

Posted by Timothy Dzurilla Dec 13, 2007

The Economist this week reported "The End of Cheap Food" siting the highest real increase in real food costs since since the organization has had a cost of food index.

More demand for meat, from cows and the such, is one reason sited for the increase in food prices as greater amounts of field space are required to produce the grains needed to fatten our four-legged friends. "It takes 8kg of grain to produce one of beef", reports the Economist.

The biggest cause of the price hike, though, comes from US subsidies on ethanol and biofuels. This encourages field space to be used for fuel maize rather than consumable varieties of produce. Also, as the price of fuel maize increases, farmers are converting fields from consumable products to inedible, barely-more-beneficial-than-oil maize. The Economist reported, "fill up an SUV fuel tank with ethanol and you have used enough maize to feed a person for a year".

Any chance of changing these policies? Probably not in an election year as candidates pander to the corn crowd in Iowa (sort of a critical state in the primaries).

The corn consumption in the States has driven the price of maize up in other nations as well. Mexico had to even put a restriction on the price of tortillas (made of maize) because they were becoming unaffordable to the lowest level of citizens.

How will this trend play out in South America, which has been hit in the past couple decades by low crop prices (coffee crisis) is still yet to be seen fully, but we'll certainly be keeping an eye on it.