TOPIC: popcorn prices up 40% due to ethanol
popcorn prices up 40% due to ethanol 13 Jul 2007 13:34 #15533
Popcorn Prices Popping Thanks to Ethanol Boom
Tuesday , July 10, 2007
A trip to the local Cineplex may become even pricier soon thanks to surging popcorn costs.
U.S. popcorn prices have risen more than 40 percent since 2006 as soaring demand for feed corn to fuel the ethanol boom has spilled over into the favorite snack of American movie-goers.
Companies that purchase popcorn each year, as opposed to larger crops such as corn and soybeans, are confined to choosing among a relatively small number of suppliers. This makes it important for popcorn companies to offer competitive prices and forge good relationships with farmers.
"I think (ethanol is) going to have a uniform effect on all geographical areas that produce popcorn," said Dennis Kunnemann, president of AK Acres Popcorn, which buys, processes and then sells popcorn to distributors, packagers and snack-food retailers.
"This year, we've paid the highest price ever that I've contracted for, 13 cents a pound," compared with 9 cents per pound last year, Kunnemann added.
The family-owned company in Imperial, Neb., has passed its increased cost on to customers by signing new contracts for between 18 and 20 cents a pound, up about 40 percent from 2006.
AK Acres also has helped in the ethanol boom by selling land next to its facility for the construction of an ethanol plant slated to begin later this year.
Americans consume 4 billion gallons of popcorn annually, totaling 13.5 gallons per person, according to the Popcorn Board, which promotes the industry. An estimated 70 percent of the snack food is consumed in homes, with the remaining 30 percent eaten at theaters, stadiums and schools.
Since most of the world's popcorn is grown in the United States, it seems fitting that American movie-goers and retail shoppers consume more of the snack than their counterparts in any other country.
At American Pop Corn, which makes Jolly Time Pop Corn, the 90-year-old company has increased the price tag for bulk items 20 percent from a year ago, and smaller bags between 1 and 4 lbs were increased 10 percent in June. The increase has helped buffer a 63 percent jump in the price it now pays for seed.
Greg Hoffman, vice president of production at the company, said the industry is holding off price hikes on microwaveable bags "in anticipation of what this final impact on ethanol will really be."
U.S. corn prices have risen to $3.38 per bushel from around $2.40 per bushel at the same time in 2006. This year alone, ethanol is forecast to consume 27 percent of the 12.5 billion-bushel U.S. corn crop, the U.S. Agriculture Department has estimated. That compares with 21 percent of last year's 10.5 billion-bushel corn crop going to ethanol.
U.S. ethanol output is on track to double to more than 12 billion gallons a year by the end of this decade. There are 117 distilleries in operation now in the United States with annual capacity of 6 billion gallons. Projects with 6.5 billion gallons of capacity should be completed within two years.
The surge in corn prices has lead several popcorn growers to shift some of their acres into corn. Don Villwock, an Indiana grain farmer, planted white corn this year on 200 acres of land he used for popcorn in 2006.
"The price run-up in corn made the decision for us," said Villwock, who also is president of the Indiana Farm Bureau. "There was a period in January where we did not think we were going to plant any popcorn, but the (buyers) responded with a price increase, and I'm glad they did," he added.
Kevin Poen, an Iowa farmer who sells between 200 and 300 acres of popcorn to packaged-foods maker ConAgra Foods Inc., said he is closely watching corn prices to gauge how much he will receive for his popcorn, which usually moves lock-step with corn, in the future.
"If prices go up, I'm sure they're going to offer me more for my popcorn next year," said Poen. "They all got to compete for acres."
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Re: popcorn prices up 40% due to ethanol 17 Jul 2007 10:23 #15534
According to the National Corn Growers Association, about eighty percent of all corn grown in the U.S. is consumed by domestic and overseas livestock, poultry, and fish production. The crop is fed as ground grain, silage, high-moisture, and high-oil corn. About 12% of the U.S. corn crop ends up in foods that are either consumed directly (e.g. corn chips) or indirectly (e.g. high fructose corn syrup). It also has a wide array of industrial uses including ethanol, a popular oxygenate in cleaner burning auto fuels.
2005-2006 U.S. Corn Use By Segment
Feed/Residual 6.1 billion (54.5%)
Exports 2.1 billion (18.8%)
Ethanol (fuel) 1.6 billion (14.3%)
High Fructose Corn Syrup 530 million (4.7%)
Corn Starch 275 million (2.5%)
Corn Sweeteners 225 million (2.0%)
Cereal/Other 190 million (1.7%)
Beverage Alcohol 135 million (1.2%)
If I were to guess, as the production of bio-based fuels becomes more prevalent, cost of driving will go down while becoming less polluting (Right now the production of bio-fuels costs more to make than it is selling for. But, that can only change by refining the production process through continuing production.) Though our popcorn prices may go up, we may see an increase in attendance from people who were reluctant to drive to a movie because of gas prices. Paying more for our popcorn might be the price for reducing our dependence on foreign fuels.
Then again, I'm one of those weird people who runs his car on used cooking oil. Praise the lard.
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