At this point I am just going to start cutting and pasting all my 2008 posts about food inflation – they are almost all repeating in identical fashion. Only edit I have to do is I was stressing about $6 corn in 08, now we are about to touch $7.
Partly due to “super cool ethanol” (fully subsidized by you) corn stock in the US is down to a 15 year low. On the plus side, the Mercedes and BMW lots in Des Moines, Sioux Falls, and Omaha should be extremely busy in the months and years ahead.
- Federal forecasters predict U.S. corn supplies will match lows not seen in 15 years as strong demand from ethanol producers raise new concerns about low global grain supplies.
- The U.S. Department of Agriculture in its monthly crop report made a larger-than-expected cut of more than 9% to an estimated 675 million bushels of domestic corn supplies as of Aug. 31, causing futures to surge to more than 2½-year highs Wednesday.
- The USDA mostly left wheat- and soybean-supply estimates unchanged, yet futures climbed on concerns that world grains supplies are precariously low. (this is sort of a funny line, because as we know by now prices no longer react to supply and demand – no matter what the USDA said about wheat and soybeans, prices can only go up!)
- Agricultural commodities have boomed since last summer, reaching their highest levels since a record-setting rally in 2008. Food prices have followed, with the United Nations Food and Agriculture Organization food-price index hitting a record high in January.
- The USDA’s projections put corn supplies as a percentage of usage at 5%, identical to the level 15 years ago. That is the ratio of supplies at the end of the crop year against how much corn would be used in a year. Supplies as a percentage of usage have fallen below 10% in only four years since 1960, Mr. Norton said.
- The USDA’s forecast of reduced corn supplies was due mainly to higher-than-expected ethanol usage. Domestic production of ethanol in the U.S. is at record levels, with exports of the corn-based fuel additive tripling in the last year. The USDA projects 4.95 billion bushels of corn will go to ethanol production in the current crop year, about 40% of the domestic harvest.
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