Weak dollar, higher demand raise food prices

Weak dollar, higher demand raise food prices

CHAMPAIGN – Area agricultural leaders say that a weakening U.S. dollar and more mouths to feed around the world – not ethanol plants – are largely responsible for the increased prices consumers are paying for food products.

"When you find yourself paying more money for a box of corn flakes at the grocery store, only a few pennies of that increase came from the price of corn," said former Illinois Farm Bureau President Ron Warfield of Gibson City.

Warfield said the price of an 18 oz. box of corn flakes rose from $2.28 a year ago to $3.39 this year. He said 1.6 cents of that increase was caused by higher commodity prices.

Warfield was one of three panelists speaking Friday at a forum at the Champaign County Farm Bureau Auditorium. The forum was jointly sponsored by the Farm Bureau and the Champaign County Chamber of Commerce.

"Food prices have come up, and there has been a lot of speculation whether there is a connection between the rise in commodity prices and the rise of food prices," said Champaign County Farm Bureau Manager Brad Uken.

Kevin Johnson, an aide to U.S. Rep. Tim Johnson who specializes in farm issues, said the U.S. dollar isn't worth as much internationally as it was 14 years ago.

Johnson said the changing rate of exchange helps drive up food prices in the United States

"Today it takes $1.50 of our dollars to get one euro," Johnson said.

"Back in 1994, it took $1.12 of our dollars to get one euro. You literally don't get as much bang for your buck."

Meanwhile, demand for American food products is increasing as the world's population increases, according to Bob Thompson, a professor of agriculture at the University of Illinois.

Thompson said farmers will be called on to feed a world population expected to grow from about 6 billion today to 9 billion by the year 2050.

And as more people in developing countries such as China, India and Indonesia begin to see their salaries increase, Thompson said, more people from those countries are able to afford grain and meat (which comes from livestock that eats grain.)

Thompson said the demand from these countries is helping drive up food prices around the globe.

All three panelists said the increased demand for grain and grain-based products around the world is largely responsible for higher food prices.

Warfield said the use of grain for ethanol plants has not had a significant effect on food prices so far.

If higher grain prices truly reduced the profit margins for the livestock industry (since livestock eat the higher priced grain), Warfield said, livestock slaughters should have decreased.

But the U.S. Department of Agriculture reported cattle and hog slaughters and milk production were all higher in 2007 over the year before.

"All of these livestock producers have responded to higher food prices not by cutting back, but by expanding," Warfield said.

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