US: Corn reserves are the lowest in 15 years, and corn prices have doubled in the last 6 months. Get ready for significantly higher food prices in 2011 | 24Fev2011 18:04:27
Get ready for higher food prices, which appear to be just around the corner for U.S. consumers and potentially a crippling burden for the world's poor.
A combination of natural calamities and congressional mandates has come together to drive world food prices to levels that make some governments in developing nations nervous, because higher costs can mean political instability. The toll on American grocery carts thus far is low, but analysts say price increases are coming.
The immediate causes of the rise are clear: bad harvests due to drought in Russia, China and Argentina and floods in Australia, among other things. But a longer-term cause may come as a surprise:— 24% of the U.S. corn crop is now mandated to go to ethanol, taking slack out of the world food market and making price shocks more likely, agricultural economists say.
Add lower-than-expected corn yields last year and, according to U.S. Department of Agriculture figures out Wednesday, U.S. reserves of field corn are at their lowest levels in 15 years. The demand for corn for ethanol is now at 4.9 billion bushels per year. Corn prices have almost doubled, from $3.49 a bushel in July to $6.10 in January. Corn futures, contracts to buy corn at a given price in the future, as of Wednesday were $6.90 a bushel.
"We're going to be going into next year's harvest with really no surplus inventory at all, so the size of next year's crop becomes critical," says Darrel Good, an agricultural economist at the University of Illinois, Urbana-Champaign.
By Seth Perlman, AP file, 9 Feb 2011