April 1, 2008

 

High US corn prices may not be cause for worry, yet
 

 

Even as a USDA report which indicated lower US corn acreage pushed CBOT corn contracts briefly to an all-time record of US$5.88 a bushel before settling at US$5.6725 a bushel, Monday (March 31, 2008), analysts warned against undue worries.

 

Terry Francl, a senior economist for the American Farm Bureau Federation, predicted Monday that corn prices will continue to rise but he said consumers should not panic just yet.

 

Many farmers will take a look at the report and decide to plant corn instead of other crops, he said, and weather conditions could also change things.

 

"We're going to have to wait until we go through the spring planting season," he said.

 

In the US corn belt, rains have delayed plantings in some areas, giving planters more time to reverse their decisions.

 

According to the USDA, corn planting is expected to remain at historically high levels but may dip this year because of the high expense of growing corn and favorable prices for other crops, such as soy.

 

As many farmers have switched, soybean planting is expected to be up 18 percent this year, at almost 75 million acres. Farmers are also expected to plant more wheat this year, which could lower retail prices for pasta and bread.

 

Soybeans for May delivery fell the 70-cent limit Monday on the Chicago Board of Trade, settling at US$11.9725 a bushel. Still, soy prices are up 45 percent since March 2007.

 

The Department of Agriculture report is based on sample surveys of 86,000 farm operators in the first two weeks of March.

 

John Hoffman, a soybean grower from Waterloo, Iowa, and president of the American Soybean Association, said farmers will always find ways to grow more crops to stabilize prices. Though high prices are good for the farmers, there's bound to be a correction, he said.

 

"There's an old saying out on the farm that the cure for high prices is high prices."