DES MOINES, Iowa — Midwest floods might not fuel as much food-price inflation as was feared.
Corn prices fell Monday after the government surprised traders by reporting that farmers tried to cash in on soaring corn demand for ethanol by planting more acres of the crop than the market expected.
That could be good news for shoppers, although food prices still have to contend with rising costs for distribution and for fuel.
Farmers will harvest nearly 9 percent fewer acres of corn this year than last year, in part because of Midwest flooding that has damaged a portion of the crop, the government reported.
But the latest USDA figures also show that farmers planted more than a million additional acres of corn than they had expected to plant in March, which could remove some of the inflation potential. Corn futures prices fell in the wake of Monday's report.
The U.S. Department of Agriculture said farmers expect to harvest 78.9 million acres of corn, down 8.7 percent from the 86.5 million harvested last year.
The report also indicates farmers planted nearly 7 percent fewer acres of corn than last year — 87.3 million acres versus last year's 93.6 million acres.
But the acres planted were still higher than the 86 million acres that farmers expected to plant in corn when asked in March.
Grain analyst Dan Basse, president of Chicago-based AgResource Co., an agricultural consulting firm, said high corn prices encouraged farmers to find more land to plant in corn.
Even with the anticipated reduction in harvested acres caused by flooding, Basse said, a robust corn harvest could soften corn prices.
”They'll weaken with time and I don't see an economic reason why new crop corn futures need to be above 8 or new crop soybean futures need to be above 16 unless we have a drought,“ he said.
Corn futures — $6 a bushel in early June and $7.60 last week — dropped nearly 30 cents to $7.25 on the Chicago Board of Trade.
An ethanol industry trade group, Renewable Fuels Association, said the expected corn harvest will be enough to satisfy projected needs.
The group said a harvest of 11.5 billion bushels will meet projected demand with 800 million bushels left over. The USDA said 4 billion bushels of corn remain in the nation's stockpiles.