April 17, 2008

US corn to reach new peaks, seen to aggravate food worries

Record corn prices in the US are seen to go even higher, adding pressures on the global food inflation concerns.

Chicago Board of Trade corn futures for the spot month, May, were around US$6.03 per bushel on Wednesday morning, up more than 50 percent from a year ago.

Bill Nelson, grain analyst for Wachovia Securities, said that it would be easier to get out to the US$7.00 to US$8.00 a bushel range than go back down to US$4.00 or US$5.00.

Further gains in corn prices are seen to hurt the bottom line of poultry and livestock producers, and raise meat prices.

Pilgrim's Pride Corp on Monday said it was cutting production for the second time in a month due to high feed costs. Its share prices rose as investors were pleased that reduced supply would drive up meat prices.

US farmers are projected to plant roughly 7 million fewer acres of corn this year than in 2007 when soaring prices prompted the largest corn area in more than 60 years, at 93 million acres.

Paul Haugens, vice-president for Newedge Trading, said a bad weather could push December corn to US$8.00 per bushel.

Haugens said there is little reason for the corn markets to weaken as global demand for feed, food and fuel remains brisk.