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Food Prices Affected by
Drought?
By
Aimee Nielson
LEXINGTON, Ky., (Nov. 14, 2007) – Like much of the Southeast,
Kentucky has suffered in a variety of ways thanks to the 2007
drought. The severe drought has impacted everything from farm
production and yield levels to domestic water supplies. Even
with a cooler fall and some recent precipitation, many consumers
may be wondering if the drought is going to affect the amount
they pay for food. University of Kentucky Agricultural Economist
Lee Meyer said the answer is a surprising “no.”
“Many folks who have driven across the Southeast would probably
think otherwise,” he said. “But, here is the situation. First,
there are few products primarily produced in the Southeast.
Kentucky is a major cattle-producing state – the largest cattle
state east of the Mississippi River, in fact, and in the
nation’s top 10. However, we still only produce 3 percent of the
feeder calves in the United States and, if you add up the parts
of the Southeast experiencing drought, we still only account for
14 percent of the feeder cattle. So, while the cattle operations
were hit hard, the drought’s impact on their production will
have only a minor impact on total U.S. supplies.”
Meyer said looking at other products would yield the same
results.
“Whether it’s tomatoes, cotton or tobacco, the impact of the
drought on total supplies will not be a noticeable factor in
consumer-level prices,” he added.
Meyer went on to explain another factor reducing the drought’s
impact on food prices is the value of the raw product in the
grocery store price is small and often minor. A beef producer
only gets about 50 percent of the store price and someone
growing tomatoes gets roughly one-third of the grocery store
price. The share for bread and other processed products is less
than 10 percent. Meyer said that even a 20-percent increase in
farm-level prices will become watered down by the time the
product reaches the store shelves.
“What is getting a lot of attention is the increase in corn,
soybean and wheat prices,” Meyer explained. “Again though, the
drought is not to blame here. In this situation, the culprit is
the demand for corn in export markets and the demand for corn
for ethanol. This raised the price of corn and set off a chain
of events. More acres going into corn means fewer acres for
other crops and thus, higher prices for cotton, soybeans and
wheat.”
When everything is measured, the increased corn demand for fuel
will have a greater impact on food prices than the drought – and
even that will be barely noticeable, he said.
Meyer emphasized that doesn’t mean the drought has not been a
problem. On the contrary, the lack of rain has reduced farmer
incomes because they have fewer pounds of feeder cattle, corn,
soybeans and tobacco to sell.
“It’s also resulted in higher costs because they have to buy
feed they normally would produce on the farm,” Meyer said. “They
have to pay for irrigation for vegetable crops. We have to
remember that as farmers’ incomes decline, their families are
not the only ones to suffer from that loss. The rural economies,
which depend on the flow of dollars through their communities,
suffer as well. “ |
Contact: Lee Meyer, 859-257-7272, ext. 228
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The UK College
of Agriculture, through its land-grant mission, reaches across
the commonwealth with teaching, research and extension
to enhance the lives of Kentuckians. |
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