Buckwheat Failure - Do-Nothing DemocRATs Force End of cheap food era as grain prices stay high
- From: Patriot Games <Patriot@xxxxxxxxxxx>
- Date: Sat, 29 Jan 2011 10:39:57 -0500
http://mobile.reuters.com/article/businessNews/idUSTRE70R3EY20110128
End of cheap food era as grain prices stay high: Reuters poll
Fri, Jan 28 2011
CHICAGO (Reuters) - U.S. grain prices should stay unrelentingly high
this year, according to a Reuters poll, the latest sign that the era
of cheap food has come to an end.
While corn, soybean and wheat prices may dip by as much as 5 percent
by the end of this year, compared to the end of 2010, that's scant
relief after last year's up to 50 percent surge drove futures to their
highest since the peaks of 2008.
The survey of 16 analysts suggests no quick fix for nations bedeviled
by record high food costs that have stoked civil unrest. And any
extreme weather event in a grains-producing part of the world could
send prices soaring further.
Fears of a shortage is already prompting importers to build up bigger
inventories after a year in which stocks of corn and soybeans in the
United States -- the world's top exporter -- dwindled to their lowest
level in decades.
While grain prices remain below the historic highs of 2008, they could
remain stronger for longer this year as intense competition among
crops for land use and depleted grain bins make it an even greater
challenge to restore equilibrium.
"Even if we have a good year, we are not going to have the inventories
we've seen before. I really do think the time of cheap food prices is
over, and that's just it," said analyst Chris Mann of Traders Group
Inc in Chicago.
"Everything is set to the point where supply equals demand right now.
But if you pull one thing out of it, or if you disrupt the equation in
some little way or tweak it, I think, with inventories as tight as
they are, it will really have an impact on prices. A drought, a flood,
anything," said Mann.
In a sign of more consumer pain on the food front, U.S. hog futures
hit a record high on Friday as South Korea stepped up imports after
culling its herd due to disease, and the U.S. government said the U.S.
cattle herd had shrunk to its smallest in 53 years. [ID:nN28171083]
The U.N.'s Food and Agricultural Organization (FAO) pointed to sugar
and meat as two primary commodities that helped to lift world food
prices to a record high in December.
SHOCKS TO GRAIN SYSTEM
A series of shocks brought the grains market to the brink last year.
A summer drought in Russia led to a suspension of grain exports, rains
in Australia downgraded the quality of its wheat crop, and a lack of
rain cut Argentine corn output. China bought near-record volumes of
U.S. corn, and demand for corn-based ethanol surged.
Now prices must remain high to encourage U.S. farmers to plant more
corn and soybeans in the spring, and traders will be on tenterhooks to
see whether crops in the United States are enough to correct the
deficit in inventories.
The average forecast of 16 grain analysts showed that Chicago Board of
Trade corn futures will end this year at $5.96 per bushel down five
percent from the end of 2010.
Corn futures posted the best gains among grains and oilseeds last
year, surging 52 percent as U.S. stockpiles fell to the lowest in 15
years in the wake of strong demand from the ethanol industry and
steady exports after the Russian drought.
Wheat futures were forecast at an average $7.93 per bushel, virtually
unchanged from the end of 2010. Wheat futures surged 47 percent last
year amid the crop damage.
Soybean futures were forecast at an average of $13.20 per bushel, down
5 percent from the 2010 close. Soybean futures rose 34 percent last
year for its second annual increase.
Prices for corn and soybeans topped out at 2-1/2 year highs last week,
while wheat hit a 29-month high on Thursday.
WORLD WANTS MORE GRAINS
Another year of high grain prices could exacerbate the problem of food
price inflation.
Surging food prices have taken center stage with policy makers,
especially in commodities-dependent China and India -- home to
one-third of the world's population. Both countries have raised
interest rates in a bid to rein in inflation.
Some analysts believe monetary tightening could reduce demand for
commodities as the cost of capital rises, but others say importing
countries, especially China and India, need to keep buying for
consumption and reserves.
"As food inflation becomes a bigger issue in the lesser-developed
countries, the global pipeline for food commodities is expanding. The
world wants to own a little more inventory," said grains analyst Terry
Roggensack of The Hightower Report in Chicago.
For North African countries like Algeria, the rush to import grains,
particularly in the past two weeks, has been fueled by concerns about
how to reduce populist anger over rising food costs that has led to
riots.
With the stepped-up demand from North Africa and the Middle East
whittling away at global wheat stocks, there is no room for error with
the winter wheat crop in the United States.
--
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