Lower Commodity Prices Won’t Translate Into Cheaper Food Prices

The Wall Street Journal reports that across the nation, farmers are planning to cut their production of corn, wheat, rice, peanuts, beef, pork, poultry and milk. In addition to growing more soybeans, farmers are also expected to grow crops more cheaply, by using less fertilizer and pesticides. Additionally, farmers may opt to grow just one crop on land that normally produces two each year, and to let some land lie fallow throughout the year, due to lower commodity prices. What that means for consumers is simple — food prices won’t get any lower this year.

With commodity prices dropping late last year with the start of the economic troubles, prices of corn, soybeans, wheat and rice have fallen by half or more from last year’s highs. For instance, the price received by dairy farmers for milk this year is heading toward the lowest levels in 30 years. That said, USDA is predicting that net farm income, a rough measure of profitability, will sink 20% this year to $71.2 billion.

Farmers are also expected to plant the fewest acres of cotton since 1983, the USDA said and the department expects the production of meat from every major category of farm animal to drop for the first time since 1973.

Additionally, supplies of crops such as corn and soybeans are relatively tight. And, wheat farmers across the Southern Plains, in states such as Texas and Oklahoma, who planted their crop in the fall, are now beset by a drought. According to the USDA, two-thirds of the wheat crop in Texas is in very poor to poor condition.