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Grain Prices' Rise May Linger for Some Time

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Grain Prices' Rise May Linger for Some Time

Economy

Grain Prices' Rise May Linger for Some Time

Grain Prices' Rise May Linger for Some Time

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  • <iframe src="https://www.npr.org/player/embed/14810470/14810555" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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A confluence of events is driving up the price of grain, and those price increases could stay around for some time. Robert Siegel talks with Scott Kilman, staff reporter for The Wall Street Journal, about how and why grain prices are rising.

MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

Here are some numbers to chew on courtesy of today's Wall Street Journal. The price of a loaf of bread is up 24 percent from a year ago. Milk is up 26 percent. U.S. farm exports are up 15 percent. The prices for Illinois' soybeans are up 75 percent. Kansas' wheat is up 70 percent. What all these numbers add up to, according to economists cited by the Journal, is a long-term trend. As one commodity watcher quoted in this story puts it, the days of cheap grain are gone.

Journal reporter Scott Kilman wrote the story and joins us now from Chicago. And first, Scott, how long has cheap grain been a fact of economic life? And what's behind this historic surge in grain prices?

Mr. SCOTT KILMAN (Correspondent, The Wall Street Journal): In recent history, it's been a fact of life really since the 1970s. That was when there was the last big grain boom. And since that time, most cereal crops have been falling in price. The real price of cereal crops - meaning if you deflate it - have been falling pretty steadily and pretty substantially since then.

SIEGEL: Now, when grain prices go up, they affect not just grain, but also milk, meat. How pervasive is the effect of commodity price increases?

Mr. KILMAN: Well, because corn and soybeans - and particularly, they are the basically the most ubiquitous ingredients in the food supply. And so they're used to make, you know, thousands of products. And they show up in everything, from high-fructose corn syrup to the food of the cattle and the hogs and the chickens that we eat. You couldn't find any other ingredient that has so much of an impact on the entire supermarket.

SIEGEL: Why? Why is this happening?

Mr. KILMAN: Well, why it's happening now is it's really several factors coming together. I mean, what's gotten a lot of attention in just the last two years has been the biofuels boom and the political support that the ethyl industry has gotten to basically turn food into fuel.

We, as consumers, have been looking for cheaper source of fuel than gasoline. Ethanol has become more popular. And so we're actually using, you know, 20 percent of the corn crop in the United States to turn into fuel. And that's twice what we are using two years ago.

But the second factor, too, is that there's been this long, sort of, gradual improvement in the diets of hundreds of millions of people around the globe. And what's driving that is the emerging economies of countries like India and China, or places where incomes are growing very quickly. And the first thing that poor people do when their incomes improve is to eat better. And that means, essentially, eating more meat and drinking more milk when they can. And those are all pretty grain-intensive enterprises.

SIEGEL: So better nutrition, globally, drives up all of these grain prices. Let's talk about winners and losers here. As consumers, we feel the pinch everywhere. Middle-class Americans - certainly, the very poor in the third world would also feel the pinch.

Mr. KILMAN: You know, the biggest losers would be the poor in the developing world. I mean, one of the things that stands out - here in the United States, we feel food inflation. And we pay close attention to it as consumers, but we only spend about 10 percent on average of our disposable income on food. And in Africa, it's not unusual for people there to spend 60 to 80 percent of their income on food. So when you see a substantial run up in grain prices in these kinds of places, it forces people to make a sacrifice that, you know, really don't have a way to make a sacrifice.

SIEGEL: And on the winners' side in the U.S. farm belt, sounds like happy times are here again.

Mr. KILMAN: It's a phenomenal boom in the grain belt.

SIEGEL: For farmers and also for people who sell to farmers, people who make tractors. It's been a great year for John Deere, for instance.

Mr. KILMAN: Right. It's been a great year for John Deere. It's been a great year for anyone who owns farmland. The prices there have been soaring.

SIEGEL: Scott Kilman of the Wall Street Journal, thank you very much for talking with us.

Mr. KILMAN: Thank you.

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