NEW YORK (AP) — Corn prices jumped to a record $6 a bushel yesterday, driven up by an expected supply shortfall that will only add to Americans’ growing grocery bill and further squeeze struggling ethanol producers.
Corn prices have risen nearly 30 percent this year amid dwindling stockpiles and surging demand for the grain used to feed livestock and make alternative fuels including ethanol. Prices are poised to go even higher because the U.S. government this week predicted that American farmers — the world’s biggest corn producers — will plant sharply less of the crop in 2008 compared with last year.
“It’s a demand-driven market, and we may not be planting enough acres to supply demand, so that adds to the bullishness of corn,” said Elaine Kub, a grains analyst with DTN in Omaha, Neb.
Corn for the most actively traded May contract rose 4.25 cents to settle at $6 a bushel on the Chicago Board of Trade.
Worldwide demand for corn to feed livestock and to make biofuel is putting enormous pressure on global supply.
And with the United States expected to plant less corn, the supply shortage will only worsen. The U.S. Department of Agriculture projected that farmers will plant 86 million acres of corn this year, an 8 percent drop from last year.
Moreover, cold, wet weather in parts of the U.S. corn belt may force farmers to delay spring planting, potentially sending prices even higher.
While corn growers are reaping record profits, U.S. consumers can expect higher grocery bills — especially for red meat and pork — as livestock producers are forced to pass on higher animal feed costs and thin their herd size.
“Higher corn prices are going to affect meat prices. If you’re feeding with $6 corn, you’ll definitely have some [cost] pressure,” Ms. Kub said.
In addition, corn and corn syrup are used in an array of products, meaning the price of everything from candy to soft drinks will eventually go up, analysts predict. It’s the latest dose of bad news for consumers, who are already struggling with higher food costs from record increases many products.
Another loser in higher corn costs is ethanol producers, as corn’s run outpaces the price of ethanol, currently $2.50 a gallon.
Please read our comment policy before commenting.