WILLMAR, Minn. - The steepest run-ups in food prices since 1990 are hurting grocery shoppers, restaurants and school cafeterias, but they're making others rich.
The winners in the new food economy include crop farmers selling corn and wheat for near-record highs after years of crushingly low prices. Ingredient makers such as Cargill and ADM are rife with profits. Fertilizer and tractor companies are cashing in. Hedge funds that made big bets on rising wheat, soy and corn were spectacularly correct. Oil and gas companies, too - it takes natural gas to cook those Wheaties and diesel to haul them around the country.
The nation's farmers saw their average household income climb about 7 percent last year to more than $83,000. But in grain-rich states, the results were dramatically higher. In Minnesota alone, the median income for crop farmers soared 80 percent to $95,000.
Chad Willis raises corn and soybeans on 550 acres near Will-mar, some of the nation's best corn-growing country.
He sells his grain nine miles up the road from an ethanol plant he invested in. His family cars are powered by an 85 percent blend of the corn-based fuel. And he knows that grocery shoppers jolted by higher prices for cereal or eggs or chicken think it's because of ethanol, which consumed 20 percent of last year's corn crop.
Mr. Willis isn't saying how much he made last year. Though he acknowledges these are good times to be a farmer, he says he's not pulling in as much as the median income for crop farmers.
"Most people are excited, yes, but cautious about when things are going to turn around, and how hard it's going to turn around," he said.
Corn, soybean, and wheat prices have been pushed at or near record highs by a combination of high demand and new money from hedge fund traders. Over the past 20 years, Minneapolis Grain Exchange trading volume has risen almost six-fold to a new record last year. The run-up is because, in the frenzied trading, the same commodities are changing hands far more than they used to.
"I got grain farmers ... who are going to improve their net worth this year - net, now - by a half a million bucks minimum. For one year. That's a nice gain. Not to mention their land's worth more," said Peter Georgantones, the president of Investment Trading Services, a commodities brokerage in Bloomington, Minn.
The International Monetary Fund estimates biofuels accounted for almost half the increase in consumption of major food crops in 2006- 07, saying it has propelled prices for corn, grains, meat, poultry and dairy.
But a report last month from the Agricultural and Food Policy Center at Texas A&M University said higher corn prices have had little to do with rising food costs because other factors, such as rising energy costs, have been at least as important.
Mr. Willis points out that farmers pay much of those profits right back out to their own suppliers.
The liquid propane that runs his corn drier cost $1.55 per gallon last year. He's been told to expect $2 this year. Fertilizer last year ran $115 per acre. This spring it cost double that. He bought 2,500 gallons of diesel fuel for his tractors last year, at a price that started at $2.50 a gallon and rose to $3.09 by the end of the year.
Originally published by Associated Press.
(c) 2008 Augusta Chronicle, The. Provided by ProQuest Information and Learning. All rights Reserved.
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