Drought produces timely review of freshman economics

How hot is it?

According to NOAA and the National Climatic Data Center, there were more than 4,000 record high temperatures reached across the nation in July.

Two hundred and ninety-nine of them were records for the month, and 171 were all-time highest temperatures ever observed, according to AccuWeather.com. Overnight temperatures were the highest ever observed as well, with 3,545 record warmest nights over the course of the month.

The weather site blames the jet stream, a thin river of air high in the sky, pushed farther north than usual because of a high pressure center that has been sitting over the central part of the nation -- that's us -- leaving little chance for rain and drying up crops.

Since Nebraska and Iowa produce much of the nation's corn, that means food prices will start going up, right?

The answer's not that simple, according to Candice Choi, food industry writer for The Associated Press.

Choi's story reinforces farmers' contention that the price you pay at the grocery store often has little to do with the price they receive for their crops.

Since most of the corn we raise goes into livestock, the price of sweet corn we enjoy can't necessarily be blamed on the weather.

Since farmers are running out of pasture and feedlots are paying more for feed, many of them are selling cattle now, pushing more beef into the supply chain.

If you remember your freshman economics class, an increased supply usually results in a lower price, which is expected to show up in grocery stores in November and December.

But selling livestock now means producers will have fewer animals to sell later -- remember supply and demand? -- which the USDA expects to push up beef prices 4 to 5 percent next year, dairy 3.5 to 4.5 percent, poultry and eggs 3 to 4 percent and pork 2.5 to 3.5 percent.

The price of fruits and vegetables isn't affected as directly as beef, pork, dairy and eggs, since supermarkets import many of their fruits and vegetables, and they often use them as loss-leaders to get consumers into their stores.

That doesn't go for local farmers' markets, who sell their produce near where it is raised, which in our case, this year, is an inhospitable environment. It might be fun to study supply and demand at the local farmers market, Saturday morning at the Sears parking lot in Westview Plaza.

Corn and sweeteners made from it do go into many packaged foods, but if the price of your sugary soda, yogurt or breakfast cereal goes up, don't be so quick to blame the drought.

Even with today's high corn prices, that 12-ounce box of cornflakes you bought for $4 contains only about 8 cents worth of corn, said Paul Bertels, vice president of production and utilization at the National Corn Growers Association.

"When you look at final food products, the more processing there is, the less significant the price of raw materials," Bertels said.

As an alternative to that, some companies simply sell smaller amounts for the same price.

All in all, it's just one more reason to hope and pray the drought breaks soon. When that happens, lets hope food price inflation cools off with the thermometer.