PowerSwitch

Huffington Post - 27/02/08

What's good for the goose is good for the gander. As the world's governments acquiesce to the outrage of OPEC's collusion to manipulate the price of oil another storm is looming in the near distance. Grain prices are lurching forward. Wheat prices have reached new records and soybeans (including soybean oil and soybean meal) and corn are not far behind. The UN is warning on the impact of rising food prices cautioning many nations may not be able to cope. Argentina, Russia and Kazakhstan have imposed restrictions on grain exports.

Where are prices going and what is at stake. Yesterday the price of wheat touched and passed $12 per bushel on the CBE. According to the USDA the variable cost (seed, fertilizer, energy) to grow plant and harvest an acre of wheat is $91 per acre. Each acre yields some 42 bushels of wheat (subject to some regional variances of course). Thus it costs approximately $2.61 to grow a bushel of wheat. Add to this the annual carrying cost of each acre of land, which can vary depending on local land values, land taxes etc. A figure of $1.75 per acre would be a fair estimate. Thus the cost to produce a bushel of wheat to an American farmer could be reasonably estimated at $4.36 per bushel.

At $12 a bushel per the calculations above, this would accord Farmer Jones a profit of just under $8.00 per bushel, a level as close to heaven as he has ever been even though it begins to present economic and social dangers for the rest of the world.

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