Wednesday, September 14, 2011

Food prices will probably rise next year

National food prices are probably on the way up because of an unseasonably hot summer and damage to this year’s corn crop, but at least in Tennessee a splash of much-needed rainfall from the remnants of Tropical Storm Lee may have provided some relief for farmers.

This spring, farmers planted the second-largest crop since World War II. But high temperatures stunted plants.

In Tennessee, corn, cotton and soybean harvests and growth of the plants continue to run behind last year’s pace because of dry conditions, a U.S. Agriculture Department report said Monday.

But at least rain from Tropical Storm Lee last week gave many farmers a boost except in some parts of west Tennessee that got only a few scattered showers from the storm.

“Pastures and late soybeans are improving,” said Richard Groce, county agent in Maury County, where 6 to 8 inches of rain fell over three consecutive days early last week.

In Franklin County, Ed Burns, a county agent, said the corn harvest made better progress there after 4 to 7 inches of rain last week.

But Burns said, “I am afraid the rain was too late to help early planted and early maturing beans …; yield loss due to hot, dry conditions is estimated at 30 (percent) to 50 percent.” He said the jury remains out on cotton crop conditions.

In major corn-growing regions around the country, though, conditions are even more uncertain.

“We just didn’t have a good growing year,” said Jason Ward, an analyst with Northstar Commodity in Minneapolis. “It was too hot, too warm, too dry at the wrong time.”

The price of corn was relatively unchanged at $7.33 a bushel on Monday. While that’s down from its peak of $7.99 in June, it’s still nearly twice the price paid last summer. A bushel of corn equals 56 pounds.

Corn is an ingredient in everything from animal feed to cereal to soft drinks. It takes about six months for corn prices to trickle down to products at the grocery store.

But many food producers are already being squeezed by the higher prices. Chicken producer Sanderson Farms Inc. reported its third straight quarterly loss late last month, in part, because of increased costs for feed. Smithfield Foods Inc., the world’s largest hog producer, said last week that high feed costs would remain a problem this year.

“Ingredient prices are going to stay high for a while,” Ward said.

Traders also worry that grain shortages could return next year because of the damaged crops.