Global community affected by decreased affordability of necessary commodities
Some USC students should be thankful they locked in their meal plan price with Sodexo: USDA spokesman Michael Dwyer said in September that he expects commodity prices to remain at historically high levels for the next decade. For those not following the corn, wheat and soybean markets, all of those commodities hit record highs this summer. While these escalating prices may not immediately cause one to worry, a little further explanation of their ramifications might. The corn being discussed is not what is found canned at Publix or ready to be shucked at Piggly Wiggly. This is industrial grain used for everything from ethanol (for gasoline) to plastics to paint to peanut butter to feed for poultry, pork, cattle, catfish and more. Soybeans are much the same, used for biodiesel, animal feed, human consumption and lubricants.
The question is, what causes these high commodity prices and how do they affect students on an everyday basis? First of all, droughts had an enormous affect on agricultural production this summer. Record drought in the American Midwest (producer of over 50 percent of the world’s corn, over 30 percent of soybeans, and 10 percent of wheat) cut projected yields. Eastern Europe, including major producer Ukraine, saw drought as did parts of Brazil. Russia’s production decreased as well. Grain bought and sold on an index allows not only for supply and demand movements (decreased supply shifts the supply-demand equilibrium higher up the demand curve) but also for speculation by investors, which exacerbates the plight of those purchasing grain.
Additionally, an increasing world population creates greater demand for both grain and meat (which relies on grain for production). While demand for commodities increases, the amount of arable land remains the same. This causes a quandary for the agricultural community struggling to keep pace with population changes by developing methods to increase production. On top of this, the increasing size of the middle-class in countries such as India and China expands the demand for meat, raising those prices.
Biodiesel and ethanol production also influence price. Nearly 40 percent of corn production goes to ethanol for fuel by government mandate. This means less grain for animal production. With increased grain prices, livestock producers unable to break-even with production costs have sent animals to slaughter early. Pork prices rose over 30 percent because of early slaughter, and cattle and poultry prices are expected to follow suit. Even the cost of catfish is rising exponentially as producers are unable to keep their heads above water.
As a result of all this, food prices are forecasted to increase 14 percent by next summer. So students: pray for rain, hope that modern science can keep assisting in expanding agricultural production, and lobby your representatives to allow more drilling and less ethanol.
It is only a matter of time before the trends start to affect the prices at Cook-Out.