A number of US restaurant chains look set to rise prices this year as higher corn prices ripple along the supply chain, according to Huffington post.
The key paragraph is buried towards the end of the article….
Part of the problem stems from protein producers’ plans to cut back onproduction in the next year to avoid paying more for animal feed, whichhas been a huge weight on profits as the cost of corn has skyrocket.Beef producers cut supply by slaughtering more animals, which sendsmore product to market initially but reduces the size of herds to lowerfuture inventory levels. Chicken producers, meanwhile, set fewer eggsto hatch.
If this is the result of higher corn prices in the US, which eats predominantly processed food, then what must it be like in economies where processed food is s luxury and the price of food is more closely tied to the price of the raw material (Mexico)?
How much of these price rises in corn are due to the US’ ethanol from corn policy is moot (as is the volume of corn used to make ethanol).
It looks like the US is going to divert between 24% and 34% of its corn crop this year to make ethanol this will replace around 2.6% of US road fuel demand .
Diverting those kinds of volumes of corn into ethanol effectively shrinks the crop by between 16-20%. This year may have been a record crop for corn in the US, but by taking away 20% and using it to make ethanol means the volume of corn is much smaller. So prices will rise. And prices for other grains are likely to rise too. Time to grow your own food and cook it at home, if you can.