Part 2 of Rising Food prices

                      As we covered in Part one, one of the keys to rising food costs is the production of ethanol and its effect on the corn industry. Cattle and the dairy industry is a large factor in this. First, some brief info about the dairy industry. Dairy farms primarily make their money with the sales of milk. Additional revenue is gained from sale of calves, cull cattle, and other small enterprise. Dairy's get paid by weight. Milk is collected a few times a week or monthly and the Farmer is paid by the hundredth weight. That is they get paid a lump sum of money for each 100 pounds of milk. (1 gallon of milk = 8.3 pounds) In 1919 dairy farmers were paid about $5.00 for 100 pounds of milk. Today, in 2010, farmers are being paid about $10.00 for 100 pounds of milk. That is only a $5.00 dollar increase in 90 years! Add rising fuel costs, feed prices, and foreign imports(the U.S. IMPORTS more than a Billion dollars worth of Dairy a year). Dairy farmers are barely making even. It costs more to feed the cows then the milk itself raises. Do the math: 80 cows X (18/56) bushels of corn/Cow X $2.50/Bushel= $64.29 per day! But corn is not $2.50 a bushel. It is over $8.00 a bushel!
                                     Wholesale prices for milk products have been falling drastically for the past few years, some as much as 50%. This is due to a "glut" of milk on the market. Way too much milk in stores. Imports have not helped. Small non-factory farming dairy farms are slowing going under. Farmers are having to cull as much as possible to lessen the "number of mouths the feed". In many cases they are closing all together. This trend is one of the causes in the dip in Beef prices this past winter. Dairy owners sent them all to the slaughter house. Feed prices are through the roof. Between 2005 and 2008 corn prices increased to more than $8.00 a bushel. According to the Congressional Research service feed prices cost farms $48 Billion dollars in 2008. If Congress raises the Gasoline Ethanol percentage from 10% the 15% it will require 1.6 billion additional bushels of corn. That is more than the entire cattle industry uses in a year! All of this means higher dairy prices in the future. Fewer new dairy farmers will open. Its just too expensive. Even land prices are a factor. Lush crop land is needed for summer feeding of cows. Its the same farmland that could be used for growing corn, or building houses. Not to digress too much but corn prices are hurting the pork and poultry industry as well. The Turkey industry is down about 9% which equals about 3000 lost rural jobs.
                                  The Ethanol industry will say that this is not true, one of the by products of the industry is leftover meal that is used for feed. There is a small problem with this. The high cost of drying and shipping the final product makes it only useful for those farms near the Ethanol plants. Most of the farms near Ethanol plants are growing corn, since its less of a distance to ship. Another factor is the "mash" should only be about 30% of the cows food. So its not really worth the cost to ship. Another impact of the corn rush is its effect on Soybeans. Corn is more of a cash crop than soy. Farmers prefer to sell corn to the Ethanol people. Fewer are growing Soy. Soy is in everything these days. A decrease in production translates into higher prices at the store.
                      Now for the fun part. Food manufacturers are not stupid. If I can see this, so can they. The next part of this will be about them and the sneaky tricks they have been using to still make money.