When the Price
Is Not Always
By Aysha Hussain
Winter 2012
Many of us have come to dread the thought of making a trip to the grocery store only
to be sucker punched by the sticker price. This summer, the average cost of a gallon of
milk and a pound of ground beef was approximately $3.50 each, whereas chicken was
$1.50 per pound according to the U.S. Bureau of Labor Statistics Consumer Price Index.
So far consumers have seen an increase in food costs by three to five percent. According
to Brian Buhr, Professor and Head of Applied Economics and Agricultural Education at
the University of Minnesota, the summer of 2012 and its vicious combination of intense
heat, dryer than normal temperatures and little rainfall has put farmers and consumers
in a quandary. Officially declared worse than the 1950s drought and labeled “The Great
Drought of 2012,” more than half the country was impacted, especially key farming
states like Iowa, Nebraska, Missouri, Illinois and Kansas. Making matters worse, winter
2011 through early 2012 saw the lowest snowfall on record across the USA. When there
is no snow or rain, says Buhr, there is not enough water or moisture supply in our under-
ground reserves for crop production. With the fall and winter seasons upon us, some
economists estimate these high prices will snowball through 2013.
With key animal and chicken feed ingredients such as corn and soybean production down
by roughly 10 to 15 percent, hoards of farmers had little food for their livestock. The high
price of feed left them with no choice but to sell their animals. Retailers, in turn, offset
food supply shortages by raising prices and consumers felt the pinch in no time.
“Corn (a key ingredient in animal feed) is indisputably the single largest crop in the
United States. So once you reduce that, you start to increase the prices across the board.
It’s simply a supply issue,” Buhr reveals. “From a consumer standpoint people are going
to be paying more for eggs, milk, meat and we’ll start to see some of that on the cereal
side but not as much.”
Yes, ironically, your favorite cereals and breads are not expected to cost significantly more,
despite the crop shortage. Even if manufacturers were to double the price of oats used to
make one box of Cheerios
, the grain is not nearly as costly as the packaging, advertising
and shipping costs of cereal. The same is true whether your favorite cereal is wheat or bran
based. (Check out Aysha Husain’s video online at
learn why).
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