As Commodities Prices Rise, Is The US Bread Basket Empty?

The US may be the bread basket to the world, but the basket is closer to empty than many suppose.

The price of corn has doubled in the last year to $7.50 a bushel. America cannot possibly supply enough corn to offset the demand which has caused the spike. Acres planted this year, according to the USDA will only rise 4.5% or 4 million acres. With corn crops in other nations hurt by weather and the demand for the commodity for ethanol, human food, and cattle feed, the US could probably not produce an adequate supply even if it doubled its planting to 180 million acres.

Many blame ethanol for much of the increase in corn demand. That cannot be entirely the case. Ethanol prices rise with corn prices. Ethanol has become less well suited financially to challenging gasoline’s demand. The ethanol industry may self-destruct as it did just over a year ago when oil prices dropped. Now, ironically,  the industry will have to hope corn prices rise more slowly than crude. That is a fool’s bet based on the numbers as they stand.

US crop production is not the only brake on price increases for agricultural products, but if crop failures in places like Russia and China continue pressure then American supply will move up sharply. Even in the US there are only so many acres, and as Will Rogers once said–“Buy Land Because They Ain’t Making Any More of It.” The bread basket is just too small.

Douglas A. McIntyre