July 31, 2008

Will lower corn prices mean lower food prices?

That's a question posed today by the Nebraska Corn Board. It asked the question because corn prices have fallen about 25 percent over the last month. Since the Grocery Gang blamed higher corn costs for its rising prices, now that corn prices have come down some, will the Grocery Gang lower its prices, too?

Said Don Hutchens, executive director of the Nebraska Corn Board: We believe the answer is no, they won't lower prices a penny. The reason is what we've said all along, that the main driver in higher food prices is high oil prices.

The news release (click here to view) points out that it takes 21 cents worth of diesel to deliver a single box of corn flakes to the store shelf. The cost of corn in that same box? Less than 7 cents. “It's pretty easy to see how fuel and energy costs impact food price," Hutchens said.

Kraft Foods, one of the players in the Grocery Gang's efforts to blame higher food prices on corn farmers, reported quarterly profits this week of $879 million, up 10 percent from last year. Unlike corn growers, who have to take the price offered by the market, food companies, it seems, are pretty good at passing long their higher fuel and energy costs.

UPDATE: Here's a good article from the Grand Island Independent on this subject.

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