ST LOUIS-Food prices could rise more slowly next year because farmers have a bigger surplus of corn on hand than previously thought. The Department of Agriculture estimated yesterday that farmers have 206 million more bushels of surplus corn on hand at the start of this year's harvest. That means farmers will have 866 million bushels of corn on hand at the end of next summer, which is higher than last month's forecast of 672 million bushels. (A bushel of corn equals 25.4 kilogrammes, or 56 pounds). The price corn fell 15 cents, or two per cent, in morning trading to US$6.30 a bushel. In June, corn hit a record high of US$7.99 a bushel after supply levels had thinned.
The USDA also increased its estimate of next year's wheat surplus by 10 per cent to 837 million bushels. In response, the price of wheat dropped 5 percent to US$6.25 a bushel. Corn is an ingredient in everything from animal feed to cereal to soft drinks. So cheaper corn could ease broader food prices. It takes about six months for higher corn prices to reach the supermarket shelves. That's because there's a long lead time between when meat companies and food processors buy their grain, and when products hit stores.
For all of 2011, the USDA predicts food prices will rise 3 per cent to 4 per cent. Food price are expected to increase more slowly next year, between 2.5 per cent and 3.5 per cent, according to the USDA estimate last month. One reason prices will continue to rise is corn supplies remain tight, even with the larger-than-expected surplus. The 866 million bushels of corn left over at the end of next year would satisfy demand for about 25 days. That's below the 30-day supply that most investors consider healthy. Just four months ago, analysts were predicting that corn could trade above US$8.50 a bushel because of strong demand from ethanol plants and hog and chicken farmers.
AP
