17 June 2008
skyhigh corn prices: food or fuel?
Tucked into today's business pages was the following report: "Corn prices reached another record yesterday, closing in on $8 US a bushel, as devastating U.S. Midwest floods raised fears of a sharply smaller U.S. corn crop and another spike in world food prices...Corn prices have shot up 11 per cent in the last week as floodwaters continue to ravage the Midwest, swallowing corn fields just before the crucial growing season. (1)
At the same time, crude oil peaked @ $140 US a barrel = $1.40 per litre coming soon to your local gas pump. Earlier this year RR blogged about the Canadian economy's dependence on oil and gas sales to our neighbour to the South and opined that we are in the throes of a recession: cf. Although media pundits are opining that Canada will experience only a "mild recession, " RR has concluded that we will be caught up again in a full-blown recession from 2009 to 2012 -- the first since 1991. For notes on the economy, see the blog boom or bust?
Bank of Canada's most recent quarterly monetary report provides the following information:
- "Canada has entered an economic flat spot with growth in the current quarter barely above recessionary levels at a 0.3 per cent annualized rate, and won't recover fully until 2010."
- "Bank of Canada governor Mark Carney said Canada won't fall into recession thanks to the relatively strong internal economy buttressed by oil and mineral exports and the record number of Canadians who have jobs. "(3)
- "The price of gasoline will soar as crude prices skyrocket on world markets and the cost of everything made from flour -- from bread to cakes and bagels -- will also go up."
- "Tight credit conditions have increased the cost that the chartered banks pay for capital, causing them to pass on only a portion of the central bank's stimulus to businesses and individuals in the form of lower borrowing costs. The Bank of Canada estimates that commercial interest rates are up to three-quarters of a point a higher than might otherwise be the case given the bank's monetary actions." (2)
We've been there before: the 1973 OPEC crisis led to inflationary pressures on the Canadian economy that culminated in the prolonged deep recession of the early 1980's. How will we adapt? One columnist opined: [we might have to start] "buying on the basis of choosing goods that are actually produced near where you live.* So if you've got a grandmother who's got recipes on how to can food during the summer that will last through the winter," [borrow them and start collecting canning jars.] (2) =====> * Interesting that Waterloo Region's 2008 One Book, One Community choice is the 100 mile Diet; RR will no longer be recycling her canning jars but will be shining up her rusty canning skills this summer.
Photos copyright Sandamara Images 2005: top left, last cob of corn harvested within City of Kitchener limits; centre, silage corn grown to feed Bruce County beef cattle; and top right, Dodge Drive, Kitchener barn and cornfields now covered over with another subdivision in Kitchener's south west corner. Will we come to regret the sacrifice of our farm land?
Sources: (1)The Canadian Press and The Associated Press, Corn prices jump on fears of reduced crop, June 17, 2008; (2)Julian Beltrame, Economy sliding closer to recession, The Canadian Press April 25, 2008; (3)Record staff and news service, Productivity falls for a second quarter, the Record June 14, 2008.
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