US corn decrease sparks price fears

By staff reporter

- Last updated on GMT

Related tags: Corn, Biofuel, Federal government of the united states

Farmers in the US are expected to plant significantly fewer corn
crops than last year, pushing the price up to a record high of $6 a
bushel, the US Department of Agriculture (USDA) warned last week.

The news indicates even more pressure on food manufacturers, many of whom are struggling to stave off margin deterioration amidst higher prices for commodities and input materials. According to the USDA, US farmers intend to plant 86m acres of corn this year, 8 percent less than in 2007. "For corn futures, we're likely to see continued upward pressures, with trading possibility into the low- to mid-$6-a-bushel range,"​ said Terry Franci, senior economist at the American Farm Bureau Federation (AFBF). The USDA report claims that farmers are turning to soybeans, a much more lucrative crop than corn. Soybean acreage will this year increase 18 percent to 74.8m acres, the organisation said. However, Franci warned that demand for corn is likely to increase this year, pushing up the price. As well as more feed needed for an increased number of farm animals, the report also said that there is likely to be a continued demand for corn for the biofuel ethanol this year. According to earlier USDA predictions, ethanol production is expected to top 10 billion gallons by 2009. Food industry reaction ​Although governments often regard biofuels as the 'green' energy source of the future, the current increased demand is controversial as it has been blamed, in part, for the increase in food prices in the last 18 months. ​In response to last week's corn price predictions, the Grocery Manufacturers Association (GMA) criticised the government's food to fuel mandates, which last year called for 36 billion gallons of renewable fuels by 2022. "The Federal Government's food to fuel mandates are diverting a quarter of America's corn supply from kitchen tables to fuel tanks, and the result is corn selling for $6 a bushel, an all time high,"​ said Scott Faber, vice president for federal affairs. "Congress and the Administration need to take a hard look at the unintended consequences of these food to fuel mandates that raise food prices without offering a significant environmental benefit,"​ he added.

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