The Drought's effect on corn and its subsequent effect on meat prices

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By: Toney Robinette, Staff Member  

The United States is currently facing the worst drought since 1956.[1]  The drought is causing several food crops around the nation to die in the field.  Corn is the nation's largest legal cash crop, with an estimated value of $76.5 billion in 2011, and this drop in production may cause serious price increases.[2]  Missouri and Indiana are also having poor or very poor crops in more than 70% of their corn yields.[3]  This significant drop in yield has caused prices to increase by 55% since June 15^th.[4]  This means that corn prices have increased to $7.96 per bushel.[5] Because corn is such an integral part of industry and food production this could have a far reaching impact beyond what consumers pay for it at the grocery store.  Corn is an essential feed for several types of domesticated livestock like chicken and cattle.  It is also used in ethanol and as an artificial sweetener.  Its myriad of uses could cause costs to increase for companies such as General Mills, Coca-cola and McDonald's.[6]  This means that costs from meat, sweetener and even fuel could increase due to the drought.  While food prices typically only increase around 1% overall for every 50% increase in corn prices, other more attenuated food types see larger increases.  For example, meat prices could possibly increase by nearly 10% due to the drought's effects on corn yield.[7]

This significant drop in production is also uniquely affecting the Commonwealth.  The USDA's weekly crop bulletin said the Commonwealth of Kentucky has been experiencing the worst effects on its corn crop with 77 percent of the crop being of poor or very poor conditions.[8]  The University of Kentucky's Forage Specialist Garry Lacefield says that one of the major effects of a drought on corn growth is the issue of nitrogen build up.[9]  Nitrogen is an essential element in the growth and development of corn but without any water the nitrogen is not converted into useful materials.  Corn is often used as feed for cattle but this nitrogen build up could possibly damage this crop's potential for use in cattle feed.  If the Commonwealth's corn fields do not receive enough water, the nitrogen levels could reach such a level that using the corn as feed could prove toxic to cattle.  While silage, a process in which corn is stored in a silo without drying, could lower nitrogen levels by 30 to 50 percent, it may still be toxic to many head of cattle.[10]  Lacefield recommends more nitrogen testing before administering the corn as feed but this could further increase already high meat prices.  On top of the already increased meat prices and the possible death of cattle due to nitrogen, Kentucky could also possibly see an increase in meat prices higher than anywhere else in the country.

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[1] Angelo Young, No Respite for US Crops; Kentucky Corn Hit Hardest, International Business Times (July 19, 2012), http://www.ibtimes.com/articles/364740/20120719/corn-prices-drought-2008-food-crisis-heatwave.htm.

[2] Luzi Ann Javier and Jeff Wilson, Crop Prices Drop After Surging to Record on U.S. Midwest, Bloomsburg Business Week (Jul. 23, 2012), http://www.businessweek.com/news/2012-07-23/crop-prices-drop-after-surging-to-record-on-u-dot-s-dot-drought.

[3] Weekly Weather and Crop Bulletin, U.S. Dept. of Agriculture  (Jul. 17, 2012), http://www.usda.gov/oce/weather/pubs/Weekly/Wwcb/wwcb.pdf

[4] Supra note 2.

[5] Hibah Yousuf, Corn, Soybean Prices Shoot Up as Drought Worsens, CNN Money (Jul. 20, 2012), http://money.cnn.com/2012/07/19/investing/corn-soybean-prices/index.htm.

[6] Id.

[7] Hibah Yousuf, Your Burger is About to get Pricier, CNN Money (Jul. 18, 2012), http://money.cnn.com/2012/07/18/investing/corn-prices-food-inflation/index.htm?iid=EL.

[8] Supra note 3.

[9] Angela Hatton, Nitrogen Levels High in Drought Damaged Corn, WKMS (Jul. 17, 2012), http://wkms.org/post/nitrogen-levels-high-drought-damaged-corn.

[10] Id.