Food inflation may dodge Midwest flood bullet

• IBTimes RSS
• Print
• E-Mail
• digg
• Del.icio.us

"They'll weaken with time and I don't see an economic reason why new crop corn futures need to be above 8 or new crop soybean futures need to be above 16 unless we have a drought," he said.

Corn futures, which were about $6 a bushel in early June and rose to about $7.60 as recently as last week, dropped nearly 30 cents to about $7.25 on the Chicago Board of Trade.

An ethanol industry trade group, Renewable Fuels Association, said the anticipated corn harvest will be enough to satisfy projected needs.

The group said a harvest of around 11.5 billion bushels will meet projected demand and leave about 800 million bushels left over. The USDA said about 4 billion bushels of corn remain in the nation's stockpiles.

"American farmers have again proven their detractors wrong, demonstrating that they are uniquely capable of meeting the growing demand for feed, food, fiber and fuel," said RFA President Bob Dinneen in a statement. "Despite challenging spring weather conditions and an unprecedented flooding event, farmers have responded to the needs of the marketplace by planting the second largest area of corn since 1946."

Dan Cekander, an analyst for Chicago-based Newedge USA, said grain prices are likely to have less of an impact on food inflation than other factors. Food costs climbed about 4 percent in fiscal 2007 which ended in July and Cekander said they could climb to as high as 6 to 7 percent.

"It's more of a function of distribution and energy and other factors," he said.

Grain analyst Jim Bower, Lafayette, Ind.-based Bower Trading Inc. said corn prices will be highly dependent on the remaining growing season.

"Whatever the weather does between about July 10 and Aug. 15 is which way that corn market will probably go. If the weather is bad and we keep reducing the yield down, we go up. If the weather is good, it's mild like it has been in the last 10 days or so, then probably we may have seen the highs," he said.

Soybean stocks reported at 676 million bushels were slightly lower than expected and yield-reducing weather problems also could have a major impact on soybean prices, he said.

• 1
• 2
• 3