Americans should brace for higher food prices this year now that demand for corn has pushed U.S. supplies to their lowest point in 15 years.
Higher projected orders from the ethanol industry sent corn futures soaring Wednesday, as corn supplies became the latest commodity to plummet. Low levels of wheat, coffee, soybeans and other food staples have already sent prices surging on the global market.
As those reserves decline, U.S. food companies are warning of retail price increases.
The ethanol industry’s projected corn orders this year have risen 8 percent, to 13 billion bushels, after record-high production in December and January, the Agriculture Department said Wednesday.
That means the United States will have a reserve of 675 million bushels left over in late August when this year’s harvest begins. That’s roughly 5 percent of all corn that will be consumed, the lowest surplus level since 1996.
The price of corn affects most food products in supermarkets. It’s used to feed the cattle, hogs and chickens that fill the meat aisle. It is the main ingredient in Cap’n Crunch and Doritos. Turned into corn syrup, it sweetens most soft drinks.
The decline in reserves caused corn futures to surge, with prices rising 3 percent to settle at $6.98. Corn prices have already doubled in the last six months, rising from $3.50 a bushel to nearly $7 a bushel. Analysts expect the price increases to continue in coming months.
Major food makers and some restaurants have already said they’ll be raising prices this year because they’re paying more for corn, wheat, sugar, coffee and chocolate, all of which are at historically high prices. Weather, such as flooding in Australia and droughts elsewhere, has affected many crops this year.
A severe drought in China, the world’s largest wheat grower, could force prices even higher. The U.N.’s food agency has warned that the drought is driving up the country’s wheat prices, and now the focus is on whether China will buy more from the global market.
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