We hope everyone enjoyed the Thanksgiving meal, even though it cost more to put the turkey on the table this year. Unfortunately, the increasing cost of food is apparently an economic hardship consumers will battle for a long time.

Some, including the National Restaurant Association, want to blame ethanol subsidies for skyrocketing prices. The association sent a letter to lawmakers urging them to repeal the federal tax credit for ethanol because the group believes it artificially inflates the price of corn and therefore food.

Ethanol is only one of several complex contributing factors that are pushing food costs higher – not only in Indiana, but throughout the world. Demand for corn, the weather, soybean imports and the world economy all played roles in the rising cost of food.

Consumers will face the same dilemma when shopping for the rest of the holiday season. To add to the pain, gas prices are 33 percent higher than last year.

Corinne Alexander, an agricultural economist at Purdue University, said overall food prices have increased 6.2 percent this year. Normal food price inflation is closer to 2.5 percent.

“I consider that a very high food price increase,” she said.

Consumers will not only be paying more at grocery stores; it also will cost 2.7 percent more to eat at restaurants. The increase for dining out is not as steep as at the grocery store because the cost of labor reflects about half the cost of a restaurant meal, and wages, sadly, have not gone up.

Corn and soybeans

Rising demand for corn for ethanol and Chinese demand for soybeans are two main drivers of the food price spike worldwide, according to a report from the non-profit Farm Foundation.

In a webcast explaining the report’s results, Wallace Tyner, an agricultural economist from Purdue University and an author of the study, said 16.1 million acres of land could meet all corn and soybean requirements in 2005. But 46.5 million acres was needed just to satisfy those needs in 2010 – an increase of 189 percent.

It took 10 percent of the 2005-06 corn crop to meet ethanol demands, but it took 27 percent of the 2010-11 crop.

The increased demand for corn for ethanol or soybeans by themselves would not be worrisome, but taken together the increased demand for both crops is a cause for concern because they are grown on the same ground.

“When you look at commodity prices, it’s not just corn and soybean prices that are at record highs. Almost every commodity is at record or near-record levels,” Alexander said. “And a significant portion of the increase, especially meat and dairy, are tied to corn and soybean issues.”

Weather

Drought in the South and high demand caused the price of pecans to increase from $9 a pound last year to $11. The U.S. produced 80 percent of the world’s pecans, but this year’s crop is about 14 percent smaller than last year.

The weather was wet in the Midwest and dry in the South. “All of that adds up to a challenging environment to producing a lot of food,” Purdue’s Alexander said. “When corn prices come down, then that filters through the livestock sector and then to food prices.”

Grain prices began to increase sharply in 2010, when drought nearly wiped out the Russian wheat crop, she said. And grain prices have continued to rise because the U.S. crops this year were smaller than expected. Corn was brought in at 146.7 bushels per acre. Normally it is 160 to 162 bushels per acre.

The same drought caused cattle ranchers in Texas and Oklahoma, for example, to reduce their herds because they didn’t have enough water for their cattle. Producers also had increased feed costs. Smaller herds yield less meat and increase the price for consumers.

People are already adjusting their diets to compensate for the increased cost of meat.

“You’re seeing people eat less beef and pork and more chicken,” Alexander said. It costs more and takes longer for a farmer to produce beef or pork than it does to produce chicken. It takes about 2 pounds of feed to produce chicken, but it takes about four times that much feed to produce beef. It takes six to eight weeks to bring a chicken up to market weight, but it takes about six months for a hog and about two years for a cow.

Alexander said part of the reason for higher prices is an increase in commodity prices as the global economy picks up. “If we had another global economic recession, we’d see prices come down sooner,” she said. “But that’s not something anyone wants to see happen.”

The best chance we have to see food prices stabilize is if farmers have a good crop in the summer of 2012; consumers would begin to see declines months later.

On average, Americans spend 10 percent of their income on food. People are already struggling because of the slow recession recovery. Increasing food costs just exacerbate an already-difficult financial situation.