WREX.com – Rockford’s News LeaderFood prices expected to go down as farmers start planting

Food prices expected to go down as farmers start planting

KANSAS CITY, Missouri (AP) - U.S. farmers are expected to boost corn and soybean acreage to historic highs this year, boosting overall grain reserves to unexpectedly high levels and driving down food prices, according to an Agriculture Department estimate released Wednesday.

Farmers will plant a record-high soybean crop while boosting the amount of corn acres by 3 percent this spring, the Agriculture Department reported. The higher-than-expected supply forecast caused a steep drop in crop futures on the Chicago Board of Trade.

"I think it's safe to say that it changes the entire supply-and-demand equation - certainly for this year and going forward," said Greg Wagner, senior commodity analyst at Ag Resource Company in Chicago.

Soybean and corn reserves were being drained to dangerously low levels over the past two years due to rising demand from overseas markets and the U.S. ethanol industry, pushing crop prices to record highs in 2008. But with the global recession draining demand from the grain market, farmers are again poised to grow a crop big enough to cause surpluses to grow.

Corn stocks are expected to total 7.69 billion bushels in March, up 11 percent from last year. Soybeans stocks will fall 2 percent to 1.27 billion bushels, but that figure is about 60 million bushels higher than the market had expected.

Futures prices dropped sharply after the USDA estimates were released.

Soybeans for May delivery fell 36 cents, or 3 percent, to $9.38 a bushel (27 kilograms), and corn was down 8 cents, or roughly 2 percent, to $3.46 a bushel. Wheat fell 20 cents to $4.51 a bushel.

A drop in commodity prices won't mean an immediate decline in food prices. It can take months or longer for prices to drop at the grocery store, partly because raw-ingredient costs are just a fraction of what consumers pay, with transportation and marketing costs making up a majority of it.

Still, the higher grain reserves are expected to keep prices down.

Farmers plan to plant a record 78.1 million acres (31.6 million hectares) of soybeans in 2010, and 88.8 million acres (35.9 million hectares) of corn. The wheat crop is estimated at 53.8 million acres (21.7 million hectares), down 9 percent from last year. The cotton crop is forecast to rise 15 percent to 10.5 million acres (4.2 million hectares).

Kevin Roth, a farmer in southwest Iowa, said he and his neighbors opted to plant more corn because of relatively higher prices. Grains might not be trading at the levels of two years ago, but the prices are still high enough that Roth is giving over two-thirds of his acreage to corn, with the rest in soybeans.

In the age-old irony of farming, it appears the eagerness of Roth and his peers could drive down corn prices by harvest time.

"It looks a lot better when the markets are going up," Roth said. "Today, they're not heading in the right direction."