December 23, 2010

US meat prices to increase as renewable fuels use more corn

US consumers will be experiencing higher meat prices, due to one-third of the US corn crop being used for renewable fuels resulting higher feed costs for livestock.

Beef and pork prices usually increase as the holiday season approaches, but consumers have seen meat prices increase earlier, and higher, than usual this year. USDA data revealed that meat costs up to 12% more than it did this time last year, and the reason is due to the higher costs of feed.

Corn was used as feed for livestock because it was cheap and abundant, but ethanol's growing popularity has taken one-third of the corn crop, raising corn prices for both industries. While the ethanol industry receives a subsidy, livestock producers are forced to absorb the costs or pass it on to the consumer.

The increasing price of corn will also raise the cost to produce other food items, according to Iowa State University economics professor, Bruce Babcock. He said that ethanol policies increase the cost of food by at least 1.5%, but the meat industry has been more heavily affected.