Since just the end of May, corn prices have climbed 45 percent and soybeans 30 percent. But the economic dominoes felled by the drought of 2012 spell trouble for the rest of Mississippi’s agricultural economy, say farm economists at Mississippi State and Alcorn State universities.
The summer drought — experienced as well by much of Eastern Europe and parts of India — is pushing up prices on the grains used in feed for Mississippi’s poultry and cattle. An upward push is also coming from competition for grain from renewable energy operations that need corn for ethanol production and soybeans for bio-diesel fuels, said Magid Dagher, an Alcorn State agricultural economist and director of the Mississippi Small Farm Development Center.
The Midwest Corn Belt has typically provided the grains used by Mississippi’s poultry and cattle operators, Dagher said. Their counterparts in the Midwest also rely on the same grain growers, he noted. “They will be demanding similar commodities. And in the end that will be putting pressure on our prices.”
Mississippi State agriculture economist John Michael Riley sees new pressures ahead for poultry and cattle, and predicts improvement for cattle ranchers may have to await the exit of more ranchers from the business.
“I expect you’ll see (cattle) producers cut back on supply or get out of the business because they are losing money. Eventually, that could improve output prices.”
In Mississippi, cattle growers should be helped by viable pastureland on which their stock can feed, he said. “The high feed prices are going to hurt but those producers who do have grass should see higher prices for their cattle by the end of 2012, because other producers are being forced to liquidate their herds.”
Poultry producers won’t be as fortunate, Riley predicted. “They are going to see extremely high input prices because of corn and soybean prices being so high.”
Both economists fear Mississippians will be hit hard by rising grocery prices related to the drought. People without jobs and those on fixed incomes will be especially burdened, said Alcorn’s Dagher, who noted that rising food prices coupled with escalating fuel prices make it hard to see how the region and the rest of the nation can avoid a round of inflation.
Customers at supermarkets and restaurants are going to feel the hurt but just how much is hard to say, Riley said. “As you move from the farm to the plate, the way the prices move tends to get a little cloudy there.”
Normally, according to Riley, a 50 percent increase in the price of corn will cause a 1 percent increase in the price of products in which corn is used.
“That’s historical,” hew said. “But it doesn’t take into account an extreme drought and corn shortage like we are going to be experiencing.”