Food and Water Watch: Corn Prices Not Cause of Rising Grocery Prices

FOR IMMEDIATE RELEASE
September 13, 2007
1:43 PM

CONTACT: Food and Water Watch 
Patrick Woodall, 202-797-6544
Jen Mueller, 202-797-6553

 
Corn Prices Unlikely Culprit for Rising Grocery Prices
Analysis of Three Decades of Prices Reveals No Connection Between Corn Prices and Grocery Realities
 

WASHINGTON, DC - September 13 -Retail prices for meat and milk are disconnected from increases in the price that farmers receive for corn, according to an analysis of food and corn prices over the past three decades released today. Retail consumer food prices have generally risen steadily with inflation or even faster irregardless of the price farmers receive for corn used to feed livestock.  Food & Water Watch’s examination of historical farmgate and retail price trends disproves the allegation that there is a direct causal relationship between corn prices and retail grocery prices.

"Although corn prices have risen over the past year in part as a result of increased ethanol demand, the correlation between crop prices and retail grocery prices remains elusive," said Food & Water Watch Policy Analyst Patrick Woodall.

Federal farm policy over the past two decades has promoted overproduction and low crop prices that consolidated the profits of the farm and food system in a tiny number of special interest hands.  During most of the past decade, these agribusinesses were able to purchase corn at very low prices, but consumer retail prices at the grocery store did not decline commensurately.

"Consumers are legitimately nervous when the cost of eating is rapidly outpacing the means of paying for food," said Food & Water Watch Executive Director Wenonah Hauter. "As long as federal farm policy promotes overproduction and ignores agribusiness consolidation, farmers and consumers will be at the mercy of pricing decisions made by a few powerful agribusiness interests."

During the first half of 2007, food prices rose by 6.2 percent and contributed to almost one-fifth (17 percent) of the total increase in consumer prices. Consumer anxiety over higher grocery prices is heightened by more modest wage and economic growth. The food industry has been capitalizing on consumer fears about grocery prices by focusing on higher costs for one of their key ingredients: corn.

Food & Water Watch examined and compared the monthly farmgate price of corn and retail price of ground beef, chicken, pork chops, and milk since 1980 and found:

  • Contrary to widespread media reports, the long-term farmgate price of corn has fluctuated significantly and has exceeded oft-cited $2 per bushel during three quarters of the months between 1980 and 2006.
  • The real, inflation-adjusted price of corn has trended downwards since 1980 from an average of $6 per bushel in the early 1980s to $2.37 two decades later.
  • During periods of farmgate corn price increases similar to the recent rise, there has been little interplay with retail food costs – in many cases retail food prices fell as corn prices rose.

"In 1980, the farmgate price for corn was $2.70 and a new Ford Mustang cost about $6,000.  Today, the base model Mustang runs about $19,000 and corn is selling for as much as $3.70 – meaning the price of Mustangs more than tripled and the price of corn increased by a little more than a third," said Woodall. "America needs agriculture and food policies designed for farmers and consumers and not just agribusiness interests."

The full analysis is posted at http://www.foodandwaterwatch.org/food/pubs/reports/retail-realities-corn-prices

###