Thursday, July 26, 2012

The Drought Will Cost You

Lurking in the very near future is a financial crisis that is going to hit the economy: the food prices crisis.

The extreme temperatures and drought that devastated the corn crop has taken the price to $8 a bushel — up 50 percent from where it was priced at just a month ago.
Soybeans are at an all-time record price, almost at $17 a bushel, up from $13, just two months ago. These two major crops are now all-time high prices.

According to the USDA, 78 percent of the corn crop this year is now in a drought-impacted condition, and 77 percent of the soybean crop is also affected.

Food prices overall rise about one percent for every 50 percent increase in corn prices, partly because corn is used in almost everything.
But it's the household food budget that's going to pay.
A large portion of the corn and soybean crop are used to feed livestock. While the impact will be impressive, it most likely won't be immediate.

Ranchers will bring more of their hogs and cattle to market now, because it will be expensive to feed them over the winter.
So the first impact on the market will be lower prices.
But then, after a few months, you’ll see prices of beef, pork, chicken, eggs, and dairy start to skyrocket sometime in November.

So the bottom line is this, while the drought is affecting 88 percent of the country's corn crop, consumers will see a 2.5 to 5 percent spike in prices for beef, pork, eggs and dairy products. The drought will also impact export prices, sending the price of corn higher around the world.

Now might be a good time to think about your food storage supplies.