Blame McDonald's — not Ethanol — for Increasing Chicken Prices

chartWell, don’t “blame” McDonald’s, that’s a little harsh. It’s a good thing for agriculture that McDonald’s is buying more chicken from farmers to meet demand for a new menu item. Bravo!

But this story from Bloomberg Businessweek about how McDonald’s may be influencing chicken prices as it prepares to add chicken wings to its menu is important for poultry farmers to read for this reason: There are many factors that influence food prices. Stop pinning rising food prices on the Renewable Fuels Standard (RFS).

The poultry industry is going hard after the RFS — arguing that the piece of legislation that sets goals for transportation fuels sold in the United States to be blended with renewable fuels such as ethanol is driving up the price of food.

It’s not ethanol that increases the cost of our food. Oil prices play a major role, and so does supply and demand. When a major global fast-food chain like McDonald’s starts stockpiling chicken wings, the market feels the reduced supply and adjusts prices accordingly.

Here’s an important (ahem) nugget of information from the Bloomberg story:

Wedbush analyst Nick Setyan says McDonald’s probably started stockpiling wings about 18 months ago, which diminished supply. In late 2011, the Georgia dock wholesale price of chicken wings started rising from 90¢ to more than $2 per pound earlier this year, an increase that got passed along at the supermarket. Prices have since fallen to about $1.46 per pound. Steyan believes it will be hard for McDonald’s to make wings a permanent menu item, as the company may have underestimated its own impact on the wing market. It’s not just wings, either. The wholesale price of boneless chicken breast has climbed 24 percent since March, an increase Sanderson Farms Chief Executive Joe Sanderson Jr. attributes to rising demand from fast-food restaurants.

Bringing down the cost of food is not as easy as ordering fries with your Big Mac. You can’t just repeal a piece of legislation like the RFS, which is actually working to keep fuel costs down, and expect all problems to be solved.

The market doesn’t work that easily.

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