The Ripple Effect

 

The Corn Belt is experiencing its worst drought in decades with temperatures reaching its hottest in American history, creating a rippling effect that will impact consumers around the world.

Why the fuss over this drought?  It’s because low corn yields mean an increase in corn prices, which will subsequently increase the cost of items made from corn. Household items like peanut butter, toothpaste, ketchup, cola, shaving cream  and more, are all made from corn by-products.  Even the cost of fuel will likely increase because of a chemical called ethanol that is incorporated into our nation’s fuel, which is made from the golden grain.

The most upfront impact on prices will be on beef and other proteins because corn is the main ingredient in most cattle feed.  According to U.S. Bureau of Labor Statistics and the U.S. Department of Agriculture via CNN Money, “the price of ground beef could rise to about $2.88 per pound this year, a 4% jump from last year, when the average price per pound was $2.77, and the price of steak is rising to $6.47.”  If Americans consume about 53lbs of beef a year per person, this could cost consumers over $300 annually!

The soybean, another crop grown widely in the Midwest is experiencing the same fate as corn.  Soybean by-products are used to make vegetable oil, biofuel, animal feed, skin care products, detergents and even foam insulation.

According to the United Nations’ monthly FAO Food Price Index (FFPI), the FFPI “averaged 213 points in July 2012, as much as 12 points (6 percent) up from June, but still well below the peak of 238 points reached in February 2011….The sharp rebound was mostly driven by a jump in grain and sugar prices, and more modest increases in oils/fats.”

The catch to knowing about this ripple effect is that we can’t do much about it.  Mother Nature has the upper hand, and the farmers have already lost hope for their corn fields. While we sweat it out and hope for rain, Obama is pushing for a new farm bill and approved a meat purchase to aid the farmers through the drought.

WATCH: Why Iowa’s drought is a global problem– CNN Money
WATCH: U.S. drought may drive up food prices– BBC News

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