Lower corn supply could push grocery prices higher

  • Associated Press
  • Monday, March 31, 2008 10:59pm
  • Business

WASHINGTON — Farmers are expected to plant less corn this year, according to the Department of Agriculture, and that could mean higher bills at the grocery store.

Corn prices have skyrocketed in recent years, helped by the burgeoning ethanol industry, which turns the crop into fuel, and rising worldwide demand for food. The higher prices have hurt poultry, beef and pork companies, who use corn to feed their animals.

Farmers are expected to plant 86 million acres of corn this year, the government predicted Monday, down 8 percent from 2007, when the amount of corn planted was the highest since World War II. The decreased supply could drive corn prices even higher — a cost for food producers that could be passed on to consumers.

According to the agriculture department, corn planting is expected to remain at historically high levels but could be down this year because of the high expense of growing corn and favorable prices for other crops, such as soybeans.

As many farmers have made that switch, soybean planting is expected to be up 18 percent this year, at almost 75 million acres. The largest increases in soybean planting are expected in Iowa and Nebraska.

Though the ethanol industry is heavily subsidized and has contributed to the rise in prices, a decrease in corn production could hurt that business, too. Higher prices for the crop could be passed on to those filling their cars up with the fuel.

The number of ethanol plants has increased from 50 in 1999 to 134 now with more being built, according to the Renewable Fuels Association. An average ethanol plant producing 100 million gallons per year consumes about 33 million bushels of corn.

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