May 9, 2008

Delayed US corn planting heightens price and food concerns

Delays in US corn planting could lead to smaller yields and lower production this year, which could further drive up record-high corn prices.

Excessive rainfalls have made US corn planting difficult and the crop must be planted by mid-May to have maximum yields. Worst still, many farmers have been lured to plant soy instead of corn due to higher soy prices and high corn production costs.

USDA said on Monday that only 27 percent of corn crop had been planted as of Sunday, well behind the five-year average pace of 59 percent. Also, corn acreage has also been projected to be down 8 percent from last year's 93-1/2 million acres.

If the delays persist, farmers may be forced to plant in less ideal conditions which could increase the potential for crop damage, resulting in widening yield loss.

Nearly a quarter of US corn are used for ethanol production and a decline in yield could squeeze supplies at a time when the weak dollar is boosting exports, pushing up corn prices to new heights and adding to food inflation woes.

Corn futures at the CBOT have raised 4 percent to US$6.60-3/4 a bushel on Tuesday set by the July 2009 contract, and corn prices have jumped by a staggering 170 percent over the past two years.

Consumers are feeling the effects as prices for food items such as cooking oil and corn flakes have increased.

The high prices are jabbing hard at meat companies too. Pilgrim's Pride, the largest US chicken producer, said it expects its feed costs to rise by more than US$800 million in fiscal 2008. Tyson Foods is also expecting its input costs to swell by an additional US$1 billion.

Rise in food prices has sparked criticism over the US programme to subsidise the use of corn for ethanol production while food makers are also lobbying the Congress to limit corn usage in biofuels.

The US is the world's top producer and exporter of corn, which is mostly used for animal feed.