South African food price increases blamed on biofuels

South Africa’s National Agricultural Marketing Council (NAMC) has blamed biofuels, among other factors, for food prices increases. The council reported price increases between July 2006 and July 2007 of 39 percent for cheddar cheese, 26 percent for milk, 21 percent for maize, 46 percent for pork chops and 32 percent for cooking oil.

The presumed link is corn fed to dairy cattle and hogs, although the NAMC acknowledged that chicken prices have remained stable — a challenge to the grain price theory that has not been addressed. Further, the NAMC report does not address the substitution of barley or oats as a feedstock.

A healthy lactating cow will produce five gallons of milk per day, and a $1 per bushel increase in the price of corn increases feed costs between $0.27 and $0.34 per day in the US. This translates to a price increase for milk of approximately 6 cents per $1 per bushel increase in corn prices. Milk is currently approximately $4.00 per gallon in the US, so a $1 per bushel increase in corn prices would result in a 1.5% increase in the retail milk price.

Corn prices are down nearly $1 as of August from their 2007 highs.

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