CHRISTOPHER S. RUGABER AP Business Writer WASHINGTON
Af ter months of rising food prices, there may be some relief coming with farmers on track to produce the second largest corn crop and fourth largest soybean crop in history. In its first estimates this year based on field visits and farmer surveys, the U.S. Department of Agriculture sharply raised its estimate Tuesday of corn production and said “nearly ideal” weather has helped Midwestern farmers recover from June’s devastating floods. That recovery eventually may lead to lower prices for corn and soybeans, which in turn could provide some relief to meat producers who use the grains for animal feed. I t won’ t happen soon, though. Even with the USDA’s current projections and an easing in grain prices recently, prices of many crops are double what they were a year ago and many chicken and meat producers have cut production. Ephraim Leibthe, a USDA economist, said in an interview with AP Radio that food inflation could drop from its current 5 percent rate “if commodity prices stabilize at this new lower level.” Corn prices have already fallen about 35 percent from record highs of almost $8, reached after the floods devastated major corn-growing s tates such as Iowa and Illinois. The USDA forecast that farmers will harvest 12.3 billion bushels of corn, up more than 570 million bushels from last month’s estimate of 11.7 billion. That’s down 6 percent from last year’s record crop of 13.1 billion bushels, but 17 percent above the 2006 harvest. Average corn prices this year are expected to drop to $4.90 to $5.90 per bushel, down 60 cents from last month’s forecast of $5.50 to $6.50. Corn for December delivery rose 8 cents to $5.25 in afternoon trading on the Chicago Board of Trade, after falling earlier in response to the report. Cooler and wetter than average weather since the floods will boost corn yields to 155 bushels per acre, up from last month’s estimate of 148.4, the department said. That’s the biggest increase in yield in the department’s August report in 10 years, according to Joe Victor, vice president for marketing at Allendale Inc., a commodities broker based in McHenry Ill. “That’s a breath of fresh air for the consumer,” he said. Farmers are grateful, too. “I’ve been farming for 33 years, and this was probably one of the hardest springs I’ve had putting a crop in,” said Larry Gleason, 56-year-old grower of soybeans and beans on 3,500 central Illinois acres near Elkhart. “I just planted it wet and hoped Mother Nature would keep sending the rain to get it up,” he said. The rains came enough to have Gleason casting his corn crops as “excellent right now.” His beans, despite being put in the ground weeks late, are progressing. Meanwhile, the USDA lowered its estimate for soybeans a bit, to 2.97 billion bushels from 3 billion last month. Soybean prices are also expected to fall to $11.50 to $13 per bushel, down 50 cents from $12 to $13.50 last month, the department said. Despite recent drops, both corn and soybeans are still double their 2006 prices, analysts said, and many large chicken and beef companies have already cut back on production. That means meat prices will likely rise in the short-term, the USDA’s Leibthe said. “It takes awhile for the industry to react,” he said. Pilgrim’s Pride Corp., the nation’s largest chicken producer, said Monday that it is reducing production by 1.25 percent, besides a previously announced 5 percent cut, and will close a plant in Clinton, Ark. Company spokesman Ray Atkinson said the company buys 324 million bushels of corn a year and 3.2 million metric tons of soybean meal. He estimates the company has lost $193 million this year due to higher grain prices. The expectation of lower pr i c e s, howeve r, boos t e d Pilgrim’s shares 21 cents, or 1.3 percent, to $16.59 Tuesday. Shares of Springdale, Ark.- based Tyson Foods Inc., the world’s largest meat company, rose 18 cents, or 1.1 percent, to $17.07. The department raised its estimate of the amount of corn that will be used for ethanol production to 4.1 billion bushels, up from last month’s estimate of 3.95 billion. Shares of VeraSun Energy, a Brookings, S.D.-based ethanol producer, jumped 72 cents, or 10. 2 percent, to $7.75. Archer Daniels Midland Co. Shares gained 57 cents, or 2.2 percent, to $26.91. The department also slightly boosted its forecast of wheat production by 2 million bushels, to 2.462 billion, and projected that wheat prices will average $6.50 to $8, down 25 cents from last month.