The corn-ethanol boom is continuing to spike up costs for food producers. Tyson, the beef and poultry titan, announced yesterday that its costs were up and earnings were down — and said that grain costs for feedstock had increased $300 million. Kraft also took a hit. Here’s what The New York Times carried:
Tyson reduced its profit forecast for the year through September, citing an increase of almost $300 million for grain, which the company buys to feed poultry. Tyson shares fell nearly 13 percent, the most in six years, on the New York Stock Exchange.
Kraft, which said increased dairy and grain costs would erode profit margins, managed to raise its full-year earnings projection by laying off workers, reassigning executives and lowering the company’s tax rate. But it said the profit margin would narrow to 13.8 percent this year, from 15.3 percent in 2006.
Farmers are growing more corn for use in biofuels, leaving less acreage for wheat and soybeans. That has pushed up the price of grain used to feed poultry and dairy cows and other cattle, so that consumers must pay more for milk, beef and chicken and related products.
Check out CEI’s prescient analyses of the food-vs.-fuel issue. Dennis Avery — a full year ago — warned that the huge government subsidies and mandates for ethanol production would lead to a food cost crunch. Another CEI issue brief (by me) dealt with rising food prices and other unintended consequences of the ethanol push.