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This summer is one of the hottest that this country has experienced so far, with record breaking heat waves and no end in sight. The bread belt in particular has suffered droughts, resulting in shortages of one essential crop: corn. But the shortage of corn will have greater impact than simply the price of corn.
Brad Rippey, a meteorologist for the Department of Agriculture, said “We’re expecting significant reductions in production potential yield, potential for corn and soybeans in particular.” According to government surveys, around 88 percent of the corn crops are currently effected by the drought.
A corn shortage has the potential to raise the price of goods all across the market. Corn is in many products. This includes not only the expected chips, grains and cereals, but also any item containing high fructose corn syrup. Non-food products that contain corn ingredients include diaper liners, feminine hygiene products, and some types of plastic. This number increases when you include goods with a cornstarch base as well.
When the cost of the main ingredient is higher, the consumer is going to make up the difference.
The drought will impact another area: the livestock industry. Most feed for poultry and cattle is corn based. According to the New York Times, the price of chicken, turkey, and dairy will rise between 3.5 and 4.5 percent, the price of beef between 4 and 5 percent, the price of pork between 2.5 and 3.5 percent, and the price of eggs between 3 and 4 percent.
In addition, farmers will substitute other grains like wheat and soy. Expect those prices to go up, too.
Despite the shortages, the global demand for corn is at a high. Since Russia stopped exporting wheat last year due to their own droughts and food shortages, the demand for corn feed skyrocketed. Yet the U.S. is exporting twice the amount of corn for fuel instead of food. Farmers have to utilize valuable crop land to meet the demands of the petroleum industry as opposed to the hungry.
Many believe that the crisis can be solved if priorities are realigned. Commodities analyst Shawn Hackett told Minyanville “It is a reason we’re having trouble with corn acreage right now. It’s forced farmers to plant more and more acreage to cover the extra demand from ethanol.”
The New England Complex Systems Institute believes this could result in a food crisis that impacts all countries. Their analysis of the problem concludes that “all the factors proposed to be responsible for the recent dramatic spikes and fluctuations in global food prices, rapid increases in the amount of corn-to-ethanol conversion and speculation on futures markets were the only factors which could justifiably be held responsible.”
Without selling corn for ethanol, however, farmers are likely to go out of business, and then there won’t be any corn at all. The price of gas will go up because a key ingredient is missing.
The corn shortage is guaranteed to have economical impact. While it is too early to tell the scale, whether more countries and products will be effected, consumers should be aware of the potential of so little rain.