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Archive for Friday, July 1, 2011

Larger corn crop may slow inflation

July 1, 2011

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U.S. food prices may ease later this year now that farmers have planted the second-largest corn crop in nearly seven decades.

The size of this year’s corn crop will be 92.3 million acres, the U.S. Agriculture Department said Thursday. That’s 9 percent larger than the average annual corn crop over the past decade. The only crop bigger in the past 67 years was planted in 2007.

Many analysts had worried that wet weather this spring would cut the number of corn acres. But record-high prices are encouraging farmers to use more acres for corn, and less for soybeans and wheat.

A greater crop estimate drove corn futures down 30 cents to close at nearly $6.21 per bushel. That’s the maximum price change allowed by futures exchanges. Corn rose to a record high of $7.99 per bushel earlier this month.

More expensive grain has led to food price increases this year. That could ultimately make everything from beef to cereal to soft drinks more expensive at the supermarket. For all of 2011, the USDA predicts food prices will rise 3 percent to 4 percent.

A huge harvest in August could ultimately slow food inflation. It typically takes six months for changes in commodity prices to affect retail food prices in the U.S. Analysts say consumers could see some relief at the supermarket by early 2012.

“All of us who perceived tighter (corn) supplies up to this point, all of us were proven wrong today,” said Jason Ward, an analyst with Northstar Commodity in Minneapolis.

Industry traders had expected just 90.8 million acres of corn had been planted. Knowing that far more corn is in the pipeline will likely pull down grain prices dramatically this summer, Ward said.

Farmers chose to plant corn at the expense of this year’s soybean crop. They planted only 75.2 million acres of soybeans, about 3 percent less than last year. Farmers have a limited supply of good farmland and usually trade one crop for another on their acreage.

“It seemed to me there was $100 to $150 per acre more money in the corn than there was in the beans,” said Tom Kreutzer, who planted 150 acres of corn on his farm near Wakeeney, Kan. “That’s the kind of math that a lot of guys were using.”

A separate USDA report Thursday estimated the U.S. had 3.67 billion bushels of corn in storage. Most analysts were expecting a reserve of just 3.3 billion bushels, said John Sanow, an analyst with Telvent DTN in Omaha, Neb. If the reserve estimate is accurate, it means backup supplies could be higher this year and next. That would ease fears of a shortage.

Comments

uncleandyt 3 years, 5 months ago

Thank you Corn Crop ! In Corn we trust

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