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Examiner
  • MCPL speaker connects dots between drought and dinner

  • While the 2012 drought made a significant short-term impact on farm prices, the natural disaster left a smaller impact on U.S. food prices, especially in comparison to other countries, an agriculture economics expert said Monday evening.

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  • While the 2012 drought made a significant short-term impact on farm prices, the natural disaster left a smaller impact on U.S. food prices, especially in comparison to other countries, an agriculture economics expert said Monday evening.
    The effects of last year’s drought also will be felt in the livestock industry for a while, in addition to growing the importance of crop insurance for farmers, said Julian Binfield, an assistant research professor at Food and Agricultural Policy Research Institute at the University of Missouri.
    Already this fiscal year, Missouri farmers have received $1.3 billion in crop insurance payouts, Binfield said. As of last week, the amount paid out for damages to the 2012 crops total $15.4 billion in the United States, with $10.2 billion of that amount related to corn.
    Binfield’s lecture “On Dry Land: The 2012 Drought and U.S. Food Prices” at Mid-Continent Public Library’s North Independence Branch marked the first in a series of free presentations related to the drought. Visit mymcpl.org for the complete schedule of remaining talks in the “On Dry Land” series.
    Binfield used historical data throughout his lecture to illustrate the far-reaching effects of the 2012 drought. From 1995 to 2005, corn averaged $2.25 per bushel. That price rose to $4.35 per bushel, on average, between 2006 and 2011.
    Last August, the price reached $8 – and beyond, Binfield said – per bushel of corn.
    But the price of food Americans purchase at a grocery store depends on many other factors, Binfield said, adding that most of the expenses tied to products like cereal and bread come from transportation, packaging and marketing.
    In 2013, the food inflation rate will outpace the overall inflation rate, Binfield said. Meat, especially beef, and cereal prices continue to grow faster than overall inflation.
    “But, relative to the average of the last 10 years, we’re not really seeing that much more food price inflation than we have in previous years,” Binfield said. “The impact of the drought on food prices in the U.S. hasn’t necessarily been too significant.”
    In comparison, the drought left a significant mark on South Africa, Binfield said, where a poorer population spends 50 percent of its income on food. Americans typically spend about 10 percent of their income on food, he said.
    Many South Africans spend much of their food income on corn meal, Binfield said. They then turn that corn meal into porridge, which South Africans eat two bowls of daily and then supplement with some meats, fruits and vegetables.
    The price of maize flour more than doubled in price between January 2006 and January 2013, but despite the dramatic increase, South Africans are still eating more of the product, Binfield said.
    “Their income dropped, so they couldn’t afford to eat meat and fruit and vegetables anymore,” he said, “so people are eating more of this corn meal, even though it was more expensive, because it’s still cheaper than meat and their incomes have dropped.”
    Page 2 of 2 - Livestock producers in Missouri and across the Midwest also were hit hard by the drought. Because the price of corn increased, the feed prices for livestock also went up, Binfield said.
    At the same time, cattle producers saw their pasture being depleted, and as a result, some chose to slaughter their livestock. Despite the drought, the net farm income should remain strong, Binfield said, especially with crop insurance payouts taking place.
    High and volatile prices will continue to shape policy decisions in Washington, D.C., Binfield said, including new farm program spending. The drought also reduced flexibility for this year, he said, running down corn reserves to a low level.
    “If there’s another drought this year, prices are going to be even higher,” Binfield said. “If you’re looking for the legacy of the drought, that’s one way that we might feel the drought into the future, is reduced flexibility not just in what we produce in cereals but also reducing credits that people have built up over the years in the production of biofuels.”
     
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