Cost of corn in a box of corn flakes: 2.2 cents. Why are corn prices being blamed for food price increases?

Centre Daily reports that the cost of corn in corn flakes is 2.2 cents per box, and that the price of corn has decreased since spring 2007 by 33%. So why is Kellogg’s announcing a $0.21 cent increase in the per-ounce cost of Corn Flakes, and allowing biofuel-based demand for ethanol to be blamed?

It would be hard to criticize a biofuels advocate for claiming that food manufacturers are taking advantage of the visibility of biofuels to jack up prices and profits using biofuels as a smokescreen.

NOTE WELL

– The total usage of corn by the biofuels industry (around 2.3 billion bushels) is less than the increase in US corn production between 2005-2007. In short, there is more corn on the market for food in 2007 than there was in 2005.

– Corn producer prices have dropped more than 20 percent since the spring, to $3.08 per bushel (56 pounds), or $0.05 per pound or about $0.03 per ear. For those of you following the futures market, corn is trading at around $3.30, down from over $4.00 earlier this year.

– An ear of unprocessed corn costs $0.40 this week at Vons in Los Angeles, or about $0.80 per pound, suggesting that transportation, profit and marketing accounts for 93 percent of the cost of a simple ear of sweet white corn. Even if corn prices were to double in the next five minutes, the price increase would only be five cents an ear.

–There are 56 pounds of corn in a bushel.

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