Corn Price Inflation Could Drop Amid Expectations of Larger Crop
- Posted on July 12, 2011 at 2:13pm by
Jonathon M. Seidl
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ST. LOUIS (AP) — A larger corn crop is easing concerns of a grain shortage and could slow food inflation later this year.
The U.S. Agriculture Department estimated Tuesday that 880 million bushels of corn will be left over when the harvest begins in the fall. That’s an increase from the previous estimate of 730 million acres.
Corn prices rose about 9 cents to $6.42 a bushel in morning trading because the projected supply increase wasn’t quite as big as analysts had forecast. Still, prices are about 20 percent lower than the record $7.99 a bushel they hit in early June.
Higher corn prices led farmers to plant the second biggest corn crop this year since World War II. The surprisingly big crop helped offset growing demand from the U.S. ethanol industry and overseas livestock producers.
A bigger crop doesn’t guarantee lower food prices. A drought or flood could limit the size of the harvested crop. Many of the acres planted this spring were on marginal land that won’t yield much grain. Many farmers planted during wet weather just because they knew they could get the crops insured.
Traders will be watching the weather in Iowa, Illinois, Nebraska and other critical farm states to make sure this year’s crop comes off as promised. The USDA estimates farmers will grow an average 158.7 bushels of corn on every acre planted.
If that figure drops by even 2 bushels an acre, the supply picture could become just as grim as it was a month ago when corn traded at record highs, said Jason Ward, an analyst with Northstar Commodity in Minneapolis. “Now, all the market focus will shift to weather, and U.S. weather alone,” Ward said.
A drought across the South, from Arizona to Florida, shouldn‘t have a big effect on the nation’s corn, wheat or soybean crops, Ward said. But it could stunt cotton production. The USDA now estimates farmer will produce 16 million bales of cotton from this year’s crop, down from 17 million it predicted last month.
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.
More expensive grain has led to food price increases this year. It 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.
Farmers switched their acreage into corn when corn futures rose. The size of this year’s corn crop will be 92.3 million acres, about 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.
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.
The USDA estimates the soybean supply will be a little bigger in August that expected last month, with the reserves rising to 200 million bushels from 180 million. But the decision to replace soybean acres with corn will pinch next year’s supply, but not drastically. The USDA now predicts there will be 175 million bushels on hand next fall, down from the 190 million predicted last month.
Higher corn prices make soybeans and wheat more expensive because farmers plant less of them. Soybeans rose 4 cents in morning trading to $13.52 a bushel.
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MUDFLAPS
Posted on July 14, 2011 at 9:52pmprobably cause gas to go up though.
Report Post »dj_bonneromics1982
Posted on July 14, 2011 at 5:12amDisclaimer: I’m a newbie here, and chances are that I will be in wild disagreement with the vast majority of commenters here (I proudly stand to the left of President Obama). I’m sure plenty of you will write me off as an America-hating commie, but I come only to speak my mind.
As for the corn ethanol subsidies. Yes I think we should get rid of them. Edible corn is a very inefficient way to produce ethanol, at least in comparison to cellulose or algae methods. And the subsidies are tilting the competitive field against these better methods of biofuel production.
I am NOT an advocate of laissez-faire economics, but corn ethanol subsidies are one definite case of government policy failure. My approach would be to subsidize research and development funding for better production methods. Economic history has repeatedly shown that R&D is one area where public funding can be a major force for good. We have many millions of tons of dead biomass in the ag industry that could be used for cellulosic ethanol, and it wouldn’t be competing with a food crop like corn-based ethanol is.
However, do keep in mind that biofuels produce carbon emissions, albeit somewhat less so than fossil fuels.
Report Post »Dismayed Veteran
Posted on July 13, 2011 at 2:48pmI guess the Department of Agriculture has yet heard of the devastating flood in the Missouri River Valley that has impacted crops in Nebraska, Iowa, Kansas and Missouri.
Report Post »SamIamTwo
Posted on July 13, 2011 at 11:49amYeah will it‘s what the gov’t is trying to do for the months of July, Aug and Sep…keep the price of heavily weighted indicies that contribute to the Cola to be announced. Oil if you note is now lower…
BLS.GOV compares those three months to the same three months of 2008…if you go back to those months you will find that there was an oil stress test…then oil fell, housing market fell, etc which gave the appearance of deflation. And BLS.GOV’s calculated COLA for the next two years was ZERO….so they have to push hard to keep it down now that food and the other lower weighted indices have jumped. Team O is working hard to suppress reality. Much like any other politician who has had a hand in running the range.
Then you have Obozo wanting to change how the COLA is calculated…it will the the 15th time it has been changed over the past 35 or so years.
Report Post »santramir
Posted on July 13, 2011 at 10:00amonly when official land vehicules, airplanes and ships run on bio fuels, the eco-truth will be accepted
Report Post »UnreconstructedLibertarian
Posted on July 13, 2011 at 8:04amI’m not opposed to ethanol, but I am wildly opposed to a subsidy attached to it. Market forces absent any government skewing should dictate the allocation of resources – be that grain for ethanol or corn flakes.
If its viable, it will be viable on its own – without government intervention.
These USDA reports are not without flaw. These estimates are based entirely upon reported acres planted – they have no idea of the condition of crops yet. The only place I know that shells corn in August is the deep south – the corn belt doesn’t mature until mid-late September.
We’ll know the score by October.
Report Post »Suzee
Posted on July 13, 2011 at 12:06amthis ethanol crap is ruining the engines in many older cars, our gardening equipment and DIESEL engines. We have two vehicles with diesel engines and if we don’t buy the expensive additive to keep everything lubed we will have to replace the engines…….what the hell are we allowing this crap for…..it has already been proven that those prius cars are worse on the environment than our great older cars…..why isn’t everybody standing up to the green crap and saying, “if it says green save the environment on the label : “we ain’t buying it” if it says, “carbon footprint” we ain’t buying it and if our local electricity outlets *WHICH THE PUBLIC OWNS” continue to restrict us because of our carbon footprint: we need to protest in every state!@!!!!!!!!!!! Our utility workers and administrations are public servants……not rulers over the public……we must stand up at the local, state, and federal levels to remind these workers that they are public servants and all their activities and regulations should be only implemented if the public tax payers give them the ok.
Report Post »cntrlfrk
Posted on July 13, 2011 at 9:07amIf you are putting ethanol in diesel engines, you have bigger problems than the price of corn.
Report Post »Maggie in Indiana
Posted on July 13, 2011 at 5:14pmI agree. the markets are picking the winners and losers the fed is and the lobbiests who push all this green stuff for the subsidies. BIG Wind is another, even though you plant right up under them the access roads and the platforms take up several out of production. farmers count every bushel and this renewable wave crossing the USA will end just like spain and Germany if we don’t get it in check.
Report Post »Mateytwo Barreett
Posted on July 12, 2011 at 10:59pmWhat! Me worry? Lets see floods, drought, tornadoes, cold weather in the northern Plains. And of course, don’t forget the USDA and the wonderful programs. BUT, never fear, the Federal Government is here! What could possibly go wrong?!? I mean- really! Hmm, I think another run to COSTCO is in order, just sayin.
Report Post »sWampy
Posted on July 12, 2011 at 8:24pmSadly most of the food inflation is high fuel costs and crap we piss away selling/giving to foreign nations, more corn will do nothing to fix those 2 problems.
Report Post »townstra
Posted on July 12, 2011 at 7:06pmWe need to stop wasting our food in gas tanks and start drilling.
Report Post »sWampy
Posted on July 12, 2011 at 8:20pmThe sob’s approved gas going to 15% ethanol this week even though car manufacturers say it will destroy cars, as a matter of fact manufacturers of every kind of gas engine say it will destroy them.
Report Post »Suzee
Posted on July 13, 2011 at 12:07amright on right on right on
Report Post »BeerSnob
Posted on July 13, 2011 at 8:45amI work for one of the big ethanol makers. We are currently mixing red wheat with our corn to make ethanol. (It’s not some kind of trade secret, it’s on Reuters). Why are we mixing wheat? It’s cheaper right now, and there’s no other home for it. Nobody wants to buy it! We’re putting “food” in our gas tanks because there’s enough food (at least in this country) to go around, and other countries don’t want to buy our food.
Report Post »Libby Tarian
Posted on July 12, 2011 at 6:13pmQuit putting your corn into my gas tank, it adds to polution, it adds to lower my gas mileage, it adds to the carbon buildup in my engine, and it fills the pockets of politicians.
Report Post »Uncurable wound
Posted on July 12, 2011 at 6:06pmMy family said the crops looked good in nw Iowa.The crops in central Minnesota look terrible.A lot of fields still have flooding in them.
Report Post »brado9505
Posted on July 12, 2011 at 9:18pmhere in iowa it looks like corn grew a foot today!
Report Post »RiseUp_Or_ShutUp
Posted on July 12, 2011 at 10:51pmI hope it was not GMO crop.
Report Post »cntrlfrk
Posted on July 13, 2011 at 9:10amNot close the Muddy Mo, they don’t.
Hundreds of thousands of acres under water or waterlogged here in Nebraska.
.
Report Post »BeerSnob
Posted on July 13, 2011 at 10:52am@riseup_or_shutup
Report Post »Love that name!
J Baustian
Posted on July 13, 2011 at 9:22pmOur sweet corn was just over knee-high a week ago. Now it is head-high, though some got knocked flat by the strong winds Sunday night.
In the details of the USDA report, it says that nearly all crops are lagging behind where they should be at of July 10th. Good weather for the next few weeks, and we could be in for big harvests. What is not said, of course, is that an early frost could really do a lot of damage.
What the USDA is saying is that high prices are causing consumption of corn to slow down, meaning more of the old crop will be left over by the time the new crop is ready to harvest. This is consistent with standard microeconomic theory — high prices stifle demand.
Report Post »UnreconstructedLibertarian
Posted on July 12, 2011 at 6:02pmEnjoying the Ag report – lets hope it turns out to be true.
Report Post »Psychosis
Posted on July 12, 2011 at 5:41pmbut i thought co2 was bad ??????? i guess the corn likes it
Report Post »Snowleopard {gallery of cat folks}
Posted on July 12, 2011 at 6:07pmSo how long until the adminsitraton jumps into action and forces the farmers to stop growing their crops and plow them under for good? Or force them to grow what the admin wants to the expense of all else, and they set the price as well (the fed’s)?
Report Post »sWampy
Posted on July 12, 2011 at 8:22pmWhat really ****** me off is we have active volcanoes that spit out more co2 in a month than man has produced in the last 10,000 years and yet they want to regulate man putting out co2 so liberals can get richer.
Report Post »IowaWoman
Posted on July 13, 2011 at 6:14amCO2 the BIG lie. CO2 is as polluting as H2O.
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