The newspapers are full of predictions that food prices are shooting up. This is mainly based on the failure in the US of the corn crop this year because of drought. This could reduce this year’s harvest by 75%. Since the US fills half the world’s export markets, shortages will be felt by farmers inside and outside the US who rely on it as feedstock for their animals. A significant portion of the US crop is used for ethanol production. The other major source of feed is soybeans. The US supplies 40% of the world export markets and without rain it may fail as well. Prices of corn and soybeans are now higher than the last historic high in 2008.
Newspapers like the Globe and Mail are trumpeting that meat prices are going to go through the roof. How do we see it?
The major packers like Cargill reported poor second quarters as meat margins shrunk due to their suppliers (farmers) insisting on higher prices to offset higher feed costs. We hear from industry sources that these companies are having a better quarter in this term although this does not apply to smaller Ontario packers. We have yet to see retail prices move much although retailers received notice of a 2% chicken price increase on July 1. At George our suppliers are holding prices in general. Prices at the Terminal for produce have been holding.
Nevertheless, there must be pressure on the supply system because of upwardly creeping corn and soybean prices. Someone in the system is absorbing extra costs without being able to pass them on. It would be interesting to understand which group of suppliers has been unable to pass on costs and why.
We don’t see the basis however for a near term explosion of food prices to the public.
We were distressed to be charged $30 recently by Harvest Wagon for a small bag of cherries. When told, the Chef retorted that he had just bought a case for $35. Their reputation with suppliers at the Terminal is that they will buy anything good at any price because they know they can resell it whatever they charge.
– Le Patron
Follow me for my ruminations on local seasonal food markets as well as speculation on broader global food issues @lepatronecc3