The U.S. Agriculture Department sent shudders through much of the food industry Monday when it released estimates that showed farmers would plant 8% less corn this year.
With corn prices already pushing up food prices, a spokesman for the Grocery Manufacturers Assn. called the projection “alarming” and warned that the estimate bodes ill for consumers at the supermarket.
“Food prices are rising twice as fast as inflation, placing significant pressure on American families who are already suffering from economic uncertainty,” spokesman Scott Faber said. “It’s time for Congress and the administration to offer families some relief and stop food inflation.”
In particular, the association is protesting federal energy policies that have created increased competition between the nation’s food producers and energy companies for corn.
But don’t put all the blame on corn-based ethanol, the USDA said. Competing demands for farmland from high-priced wheat and soy crops also play into reduced corn plantings, officials said.
The decline in the amount of farmland that will be devoted to growing corn this year will worsen the effect of “food-to-fuel mandates which are resulting in massive increases in food prices,” Faber said.
Grocery prices are rising at more than a 5% rate this year, the fastest increase since 1990, according to the Department of Labor.
Corn prices jumped 6.75 cents to $5.67 a bushel Monday, up 51% from a year earlier, on news that farmers would be planting fewer acres. Farmers intend to plant 86 million acres this year, 7.6 million acres less than 2007.
Food producers are worried about the decline because corn is a building block for a wide range of foods.
It is feed for dairy cows and egg-laying hens. It fattens cattle, hogs and chickens. Corn syrup is the third-largest ingredient in Heinz ketchup and is the sweetener that goes into soda pop and hundreds of other food items.
Federal officials said corn plantings have fallen as prices have soared for wheat and soy. Farmers are looking for the best payoff for their investments.
“There is a set amount of farm acres, and every crop competes for them,” said Elaine Kub, grains analyst for DTN, an Omaha-based agriculture information firm.
The acreage also has dipped because of the high cost of the petroleum-based fertilizers and agricultural chemicals that are used to grow corn as well as the standard practice of rotating crops to sustain farmland.
“Despite the decrease, corn acreage is expected to remain at historically high levels as the corn price outlook remains strong due in part to the continued expansion in ethanol production,” the USDA said in its report.
What happens next will depend on Mother Nature, Kub said.
The current wet weather and flooding in the Midwest could hamper or delay plantings of the grain and reduce the amount that is harvested.
“Corn plantings could be a real challenge, and the later you go into May, the lower yield we are going to see,” Kub said.
Later in the year, heat and drought at the wrong times could hurt the crop.
Soybean producers intend to plant 74.8 million acres this year, up 18% from last year. Much of the increase is a result of the run-up in soy prices in recent months. Soy prices closed at $11.97 a bushel Monday. Although that was down 70 cents from Friday, it was 57% higher than a year earlier.
Wheat acreage also is expected to rise this year, up 6% to 63.8 million acres. Wheat prices have risen 112% in the last year, closing off 60 cents Monday at $9.29 a bushel.