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Drought likely to drive up prices.
This drought-damaged ear of corn is from a field
CHARLIE NEIBERGALL/ASSOCIATED PRESS
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IT HAS BEEN a hot,
It's not too difficult for a grain farmer to figure what the drought cost him in gross crop revenues. It is much more difficult to figure out what the drought will cost everyone, farmers included, for years to come.
We all know about the proverbial snowball rolling downhill. A shortage of one thing, in this case feed grains such as corn, wheat, barley and soybeans, will inflate prices for all feeds in which these commodities are used. We have already seen this in the past three years, as we now pay on average 20 percent more for commonly used products such as dog and cat food.
This year's drought may turn out to be among the worst in recent memory. Across the commonwealth, most counties are reporting 40 to 70 percent losses in corn yields. According to the U.S. Drought Monitor, Virginia is not as drought-stricken as some Midwestern states, especially those in the Corn Belt, where 80 percent of the area is classified as being in extreme or exceptional drought. So here we are with not enough corn to go around--and all these animals to feed. That alone will cause grain prices to rise.
However, grain-based-feed manufacturers are not the main buyers of feed grains anymore. Now there are new shoppers for corn, namely fuel distillers, and they want grain as badly as feed manufacturers. Recent federal ethanol mandates, specifically the 2007 Energy Independence and Security Act, require that every gallon of gas contain 10 percent ethanol by 2022. New "go green" incentives and demands also encourage distillers to purchase soy oil for use in biodiesel. The result is a greater demand for corn and soybeans, with a severely drought-reduced supply.