Corn Planting Declines - U.S. Farmers Plant Less Acreage than in Previous Years
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In a report released earlier in the week by the
U.S. Department of Agriculture (USDA),
the government agency proclaimed that the nation's farmers are expected
to plant fewer acres of the nation's staple ingredients, wheat and corn. The
agency acknowledged that despite less area of crops, consumers should not be
overly concerned about greater-than-normal price increases at their local
grocery stores.
The USDA's planting report should have little effect on last week's Economic
Research Service forecast of a 3.4% increase in the Consumer Price Index
(CPI), which is due out April 15. The CPI measures the price level of a fixed
market basket of goods and services purchased by consumers. The CPI is the
most widely cited inflation indicator and is used to calculate the cost of
living.
Corn, the most abundant ingredient used in a mass variety of foods, is also a
staple in the feed used for pigs, chickens and cattle, which are typically
processed into packaged meats that consumer purchase at the grocery store.
A contributing factor to the lack of acreage planted this year is the
weakening demand for corn from the livestock and ethanol industries. "We're
projected to produce over 12 billion bushels... and corn stocks are up 1%
from March of 2008. In my opinion there's plenty of corn to go around,"
announced president of the National Corn Growers Association, Bob Dickey.
Dickey went on to add, "We're hoping that at some point in time we can
increase demand at all levels, whether it be the ethanol industry, livestock
industry or exports."
The level of production is expected to match last year's figures, although
there is a projected 1% decline in total acreage from last year, down to 85
million acres. The recent forecast is down more than 9% from 2007 total area.
Farmers appear to be discouraged in planting this year due to economic
factors such as lower selling prices and an increase in fertilizer prices
which have forced some farmers into planting other crops this year.
As for other crops, the USDA forecasted that the acreage of soybeans is
expected to increase slightly, to a record 76 million acres, just shy of the
81 million acres other analysts were anticipating. Upon the report's release,
soybean prices pushed higher by more than 5%, which in turn, could lead to an
increase in price of cooking oil for consumers.
Much like corn, the planting of wheat during the season is predicted to
decline to just under 59 million acres, down more than 7% over last year's
total farming acreage. Although the U.S. could be producing less wheat, that
of spring, winter and durum wheat, the lack of production should not have a
substantial effect on prices as the world wheat supply is currently at record
levels.
In the commodity markets, the price of corn for May delivery slipped $0.0875,
or 1.1%, to $3.96 a bushel on the Chicago Board of Trade (CBOT). Today's
price follows Tuesday's surge in corn, as prices jumped more than 4.8%,
reaching $4.06 per bushel, this highest level since mid-January. Over the
past 12 months, the price of corn has fallen more than 34%.
The price for wheat declined as well on Wednesday, falling just under 1%, or
$0.053 to $5.2775 a bushel. Tuesday's trading saw the price of wheat jump more
than 4% by the close. During the 1st quarter, the price of wheat has retreated
more than 13% from the end of 2008.
Finally, soybean prices advanced in Wednesday's trade, adding 0.5%, or $0.048,
to $9.5675 a bushel following Tuesday's surge after the USDA report on soybean
acreage estimates.
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