USDA predicts no relief from rising food prices
Feb. 25, 2011
by Meat&Poultry Staff
WASHINGTON – This year’s attendance for the US Department of Agriculture’s annual outlook forum has attracted a much larger than normal crowd of farmers and agricultural commodities traders, bringing to light the growing importance of rising food prices worldwide. According to The Financial Times 2,000 delegates heard Joseph Glauber, USDA’s chief economist, say that the grains markets’ tightness will likely extend into 2012.
During his annual outlook, Glauber said the US “corn market will continue to be tight” next year, wheat “will tighten further,” and soy beans “remain tight as well.” As a result, the cost of food – already at an all-time nominal high at a wholesale level – will increase. In 2011, consumer prices for food are expected to rise to between 3% and 4% in the US, and possibly more in the latter half of the year, ending a tame period at the supermarket, USDA forecasts.
USDA predicts current high prices will cause farmers to sow 9.8m more acres with crop seeds this year, bringing total planted acreage to 255m acres for the eight major field crops. As the most widely grown crop, corn will likely be planted on 92m acres, an increase of 3.8 acres from 2010.
The increase in acreage is massive by historical standards and analysts warn that farmers will only deliver the increase under ideal weather during the planting season. And even if farmers deliver a record acreage, demand continues growing.
The US exports around 60%of the world’s supplies and the price of the grain, used to fatten livestock, filters quickly into the food supply chain, affecting meat and poultry prices.
Corn prices have increased 90%from a year ago, hitting a two-and-a-half-year high of $7.24¼ a bushel this month, after the US produced a large but disappointing harvest last year and demand for animal feed grows in emerging economies. Corn consumption rose also in the US, particularly to accommodate ethanol plants.
USDA indicated high corn prices were beginning to curb demand in the meat industry. Pig and poultry farmers are thinking twice before expanding and cattle herds are in decline. Not so for ethanol, which is refined from corn in the US.