Corn supplies expected to jump, easing shortage worries

Corn supplies expected to jump, easing shortage worries

By Christopher Leonard, Associated Press

ST. LOUIS — Corn supplies are projected to be higher than expected this fall. A bigger crop would ease concerns of a grain shortage and could slow food inflation later this year.

The U.S. Agriculture Department said Tuesday that 880 million bushels of corn will be left over when the harvest begins. That's an increase from the previous estimate of 730 million acres (295 million hectares).

Higher corn prices led farmers to plant the second biggest corn crop this year since World War II.

More expensive grain has led to food price increases this year. It could ultimately make everything from beef to cereal to soft drinks more expensive at the supermarket. For all of 2011, the USDA predicts food prices will rise 3% to 4%.

News of the big corn crop brought down global corn prices 20% over the last month. A huge harvest in August could ultimately slow food inflation. It typically takes six months for changes in commodity prices to affect retail food prices in the U.S. Analysts say consumers could see some relief at the supermarket by early 2012.

Farmers saw corn futures rise, so they switched their acreage into corn from other crops like soybeans. The size of this year's corn crop will be 92.3 million acres (37 million hectares), about 9% larger than the average annual corn crop over the past decade. The only crop bigger in the past 67 years was planted in 2007.

Farmers chose to plant corn at the expense of this year's soybean crop. They planted only 75.2 million acres (30.4 million hectares) of soybeans, about 3% less than last year. Farmers have a limited supply of good farmland and usually trade one crop for another on their acreage.

Higher corn prices make soybeans and wheat more expensive because farmers plant less of them.

The price of corn is a driver for food inflation because the crop is an ingredient in feed for poultry and livestock, and a staple in many processed foods. When corn prices rise, food processors and grocers pass along the higher costs to the consumer.

A bigger crop doesn't guarantee lower food prices. A drought or flood could limit the size of the harvested crop. Many of the acres planted this spring were on marginal land that won't yield much grain. Many farmers planted during wet weather just because they knew they could get the crops insured.

A bushel of corn equals 25.4 kilograms (56 pounds).

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