Corn pops to record $6 per bushel
Food, ethanol prices will rise as supply won't meet demand
NEW YORK - Corn prices jumped to a record $6 a bushel yesterday, driven by an expected supply shortfall that will only add to Americans' growing grocery bills and further squeeze struggling ethanol producers.
Corn prices have shot up nearly 30 percent this year amid dwindling stockpiles and surging demand for the grain used to feed livestock and make alternative fuels. Prices are poised to go even higher after the US government this week predicted American farmers - the world's biggest corn producers - will plant sharply less of the crop in 2008 compared to last year.
"It's a demand-driven market and we may not be planting enough acres to supply demand, so that adds to the bullishness of corn," said Elaine Kub, a grains analyst with DTN in Omaha.
Corn for the most actively traded May contract rose 4.25 cents to settle at $6 a bushel on the Chicago Board of Trade, after earlier rising to $6.025 a bushel - a record high.
Worldwide demand for corn to feed livestock and to make biofuel is putting enormous pressure on global supply. And with the United States expected to plant less corn, the supply shortage will only worsen. The Department of Agriculture projected that farmers will plant 86 million acres of corn in 2008, an 8 percent drop from last year.
Moreover, cold, wet weather in parts of the US corn belt may force farmers to delay spring planting, potentially sending prices even higher.
While corn growers are reaping record profits, US consumers can expect even higher grocery bills - especially for meat and pork - as livestock producers are forced to pass on higher animal feed costs in addition to thinning their herd size.
In addition, corn and corn syrup are used in an array of products, meaning the price of everything from candy to soft drinks will eventually go up, analysts say. It's the latest dose of bad news for US consumers, who are already struggling with higher food costs from record increases in the price of wheat, soybeans, and other agriculture products.
Another loser in higher corn costs is ethanol producers, who are struggling to squeeze out gains as corn's record-setting run outpaces the price of ethanol, currently at around $2.50 a gallon.
The 147 US ethanol plants have the capacity to produce 8.5 billion gallons of fuel a year, according to the Renewable Fuels Association. Corn is the basic feedstock for most of the plants and about 20 percent of last year's 13 billion bushel corn crop was consumed by ethanol production.
That percentage is expected to increase to 30 percent for the next crop year, which ends Aug. 31, 2009, according to Terry Francl, a senior economist for the American Farm Bureau Federation.