Food, feed increases in price with crude oil
Over the past several months the consumer price index has increased dramatically for just about everything.
When you think about it, it all relates back to one thing —crude oil. The price of crude oil has skyrocketed, and since our modern society is heavily dependent on crude oil, no relief is in sight. Until more refineries are built or exiting refineries are modernized and enlarged or until more oil drilling occurs by U.S. companies in either Alaska, off our shores or elsewhere in the country, we cannot expect any changes to occur.
Alternative fuels are being explored and might sometime become viable, but for now, oil is the tail that is wagging the dog.
Ethanol, for example, is being used to replace crude consumption by up to 15 percent of some gasoline mixtures. There are dozens of ethanol plants fully operating throughout the Midwest. They are touted as producing a renewable fuel source.
They are also being blamed for rising food costs since corn is being used to produce ethanol and not to feed livestock or make corn flakes — even though distiller's grain, which is the byproduct of ethanol production, can and is used for livestock feed.
There will be a large quantity of corn that will annually go to feeding the surging ethanol plants. More and more it seems feasibility studies are being conducted in the Northeast states for ethanol from wood byproducts, switch grass and even corn.
One plant is under construction for Clearfield; others are being discussed for Crawford and York counties in Pennsylvania. Probably the trend will continue, but often it is apparent it just is not feasible. Especially for corn, since the price now exceeds $5 per bushel.
Many nonfarmers might think, "Wow, farmers are really making money." Really, though, farmers in this area do not produce any corn for ethanol. Corn raised in this area that is not consumed locally for feed is sold through grain brokers and hauled to Eastern Pennsylvania to the large feed mills.
This is not to say that corn producers are not selling corn for $5 per bushel. However, farm profitability is difficult to find. Consider that dairy, beef, pork and poultry producers must pay for that same corn now for feed, and the price of their product has actually decreased in price. Consider that input or production costs for corn have increased nearly 100 percent for some costs such as fertilizer, seed and diesel fuel.
Some might say, "Well, beef at the butcher shop is quite a bit higher than last year." Well, it is, but the producer is not getting the market increase — livestock sold at auction have not increased. The reason for the increase goes straight to crude oil. Just think about it for a while: Everything in our economy is dependent on crude oil.
Luke Fritz is executive director of the Butler County Farm Service Agency.
