The Most Expensive Thanksgiving Ever

This year’s Thanksgiving dinner will be the most expensive ever.  For that, much of the thanks can be given to ethanol – which continues to divert grain from food to fuel.

To be sure, this year’s drought didn’t help matters.  The corn crop is a full 28 percent smaller than what was expected during planting season last May, and 13 percent smaller than last year’s.  But while grain supplies were tightened, ethanol production nonetheless continued forward.

In light of the drought, a coalition of livestock producers and a bi-partisan group of eight governors requested earlier this Summer that the federal ethanol mandate be waived to lessen the impact that ethanol has on corn prices.  Less than one week before Thanksgiving, however, the Obama Administration denied that request.

Because of the federal mandate, more corn now goes into ethanol production than into livestock feed.  That mandate – which now stays in place despite the drought – has driven corn to record prices.  High corn prices increase the cost of feeding livestock.  Indeed, corn prices are now so high, some farmers have been driven out of the business.  Those left must pass on costs.

The US Department of Agriculture predicts milk prices will increase by 3.5 percent to 4.5 percent due to the smallest dairy herd in more than a decade.  Higher milk prices mean dairy products such as cheese and cream will increase by up to 10 percent.

As for turkeys, about 70 percent of the cost of raising a bird is feed.  Record corn prices mean more expensive turkeys – or bankruptcies. Or both, which has been the case in the industry since 2008.  In terms of Thanksgiving dinner, the Consumer Price Index shows the cost of a turkey is up 6.9 percent – or about a dollar per bird – so far this year.

Consider, the American Farm Bureau Federation conducts an annual cost survey for a typical Thanksgiving dinner for 10.  This year the estimated cost is $50.99.  Back in 2006, before the federal ethanol mandate was in place, the cost of Thanksgiving dinner was $34.71.  That’s a 32 percent jump.

Compare that to the 13 years from when the survey was started in 1993 up to 2006, the last year before the ethanol mandate.  Over that period, the cost of turkey and trimmings increased a total of 15 percent.  Roughly, that’s inflation of a little more than one percent per year before the ethanol mandate; inflation of more than five percent per year since.

Unfortunately, because the waiver denial, this Thanksgiving’s time in the record books as the most expensive may be short lived.  With this year’s short crop, there will be less stocks to carry over into next year without the ethanol waiver.  That means anything short of a record crop would still leave a grain shortage and high feed – and food – prices.

According to the livestock coalition who petitioned for the ethanol waiver, “we now have about one-third less of the corn that we need to adequately supply animal feed, ethanol, exports and sufficient carry-over levels.”  Indeed, USDA statistics show that current carry-over stocks of corn would cover only about 21 days of use next year.  And next Thanksgiving comes 332 days into 2013.

Happy Thanksgiving.  If you can afford it.