November 9, 2008
By Paul Fallon
Times West Virginian
FAIRMONT — Increasing costs of fossil fuel, expansion of biofuel programs, and drought-like conditions in some portions of the country have all combined into a perfect storm that has caused food prices for West Virginia consumers (and the nation) to increase.
Many countries, especially those that are less developed, have experienced food shortages. However, food shortages in the United States rarely happen, said Ephraim Leibtag, an economist with the Economic Research Service with the United States Department of Agriculture. Instead of shortages, typically price inflation occurs.
From beer to bread, prices have increased across the board at supermarkets around the country, Leibtag said. He noted that food prices have increased at the fastest pace since 1990.
“Prices are going up 6 percent year after year,” he said. “And our projections are that prices will increase by 6 percent again next year.”
Leibtag added that the cost of most staple food items has increased steadily. These foods include corn, soybeans and wheat. He noted that most processed food include some of these items as ingredients.
“And we’re seeing canned food prices go up because of this,” he said.
Leibtag added that rising fuel prices have also greatly contributed to the increasing cost of food nationwide. He noted that the rising costs of gasoline and diesel fuel are also a doubled-edged sword that cuts both ways.
He noted that farmers now incur more of a cost maintaining their fields and harvesting their crops because of rising gas prices. The cost of shipping those crops to market has also drastically increased. However, there are other factors relating to fuel prices that have contributed to the rising cost of food.
The escalating oil costs have directly resulted in the increased exploration for alternative fuels, and ethanol is one of the most widely produced alternative fuels.
The United States and Brazil account for most of the world’s ethanol production, according to a Economic Research Service report entitled, “Global Agriculture Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices.”
In the United States, ethanol is produced using corn. Brazilians utilize sugar cane to produce the alternative fuel. According to the report, U.S. production of ethanol began to increase dramatically in 2003. In that year, ethanol production accounted for about 10 percent of U.S. corn usage, the report reads.
“About 25 percent of our corn production is going to make ethanol,” Leibtag said. “And we’re projecting that it could go up to 30 percent within the next year.”
The rising cost of corn has also caused the cost of meat to increase, Leibtag said. He pointed out that the majority of corn is used to feed livestock, and that ethanol production is taking larger and larger amounts of that product.
Buddy Davidson, communications officer with the West Virginia Department of Agriculture, added that the rising demand for corn has also affected the poultry industry in the country, especially in the Mountain State.
The poultry industry is also adversely affected by rising heating costs, Davidson said. He noted that poultry producers must heat the large chicken coops all through the winter. He said that the poultry farmers then must pass the added expenses on to the consumers.
According to Davidson, Gus Douglass and the state department of agriculture, are working to lower the cost of poultry in the state. He said that Douglass was exploring the possibility of using pellet stoves at Eastern Panhandle poultry farms in order to lower heating costs.
“And we already have a pellet stove industry in that part of the state,” Davidson said.
He added that the state department of agriculture has also been working on promoting locally grown produce as well. He noted that the agency has been attempting to expand the farmer’s market program in the state in many different fashions, including attempting to establish year-long markets.
Davidson acknowledged that bolstering farmer’s markets in the area would do little to reduce prices of produce for state residents, but he did say that it would guarantee fresh produce to people who bought the locally grown items. He added that it would also greatly benefit local farmers, helping to keep them afloat during trying economic times.
Corn, soybeans, wheat, beef and poultry are not the only commodities that have increased in price over the years. Another great American staple product has also jumped in price because of the dwindling supply of a key ingredient — beer. The cost of the two major ingredients in beer, barley and hops, have increased dramatically over the past few months because of worldwide shortages.
Photo: John Fonseca, a partner with the West Virginia Brewing Co. in Morgantown, mixes ingredients that are used for brewing beer. Barley and hops are now in short supply, and the price of beer is rising all across the country. (Tammy Shriver / Times West Virginian)
John Fonseca, a partner in the West Virginia Brewing Co., said that depending on who the brewery uses to supply the barley and hops determines how hard it is to obtain the two ingredients.
“If you have a contract with a good company, then you’re OK,” Fonseca said. “But if you don’t, then it could be a problem.”
Fonseca said that he believed the hops and barley shortage was due in part to the fact that many farmers are now switching from growing the beer-making ingredients to growing corn for ethanol.
He said that previously it would cost his business about $1,400 to brew one of its 68 recipes of beer. He added that now it costs about $2,000. To account for increased production costs, the cost of the finished product also increases.
One of the nation’s premier brewers, Anheuser-Busch Inc., the maker of Budweiser and other popular beverages, is also not immune to the rising cost of barley and hops. Michael J. Owens, vice president of business operations with the company, said the firm will be slightly increasing the costs of its beverages because of the shortage.
“But Anheuser-Busch has a sufficient supply of hops and barley to meet our brewing needs,” Owens said.
E-mail Paul Fallon at pfallon@timeswv.com.
http://www.timeswv.com/todaystopnews/local_story_314005739.html