NEW YORK – Corn prices jumped to a record $6 a bushel Thursday, driven up 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 including ethanol. Prices are poised to go even higher after the U.S. government this week predicted that American farmers – the world’s biggest corn producers – will plant sharply less of the crop in 2008 compared with 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, Neb.
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 – an all-time high.
Worldwide demand for corn to feed livestock and to make biofuel is putting enormous pressure on global supply. And with the U.S. expected to plant less corn, the supply shortage will only worsen. The U.S. 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 U.S. corn belt may force farmers to delay spring planting, potentially sending prices even higher.
While corn growers are reaping record profits, U.S. consumers can expect even higher grocery bills – especially for meat and pork – as livestock producers are forced to pass on higher animal feed costs and thin their herd size.
“Higher corn prices is going to affect meat prices. If you’re feeding with $6 corn, you’ll definitely have some (cost) pressure,” Kub said. 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.