An era of cheap food may be drawing to a close

[Amelia]

An era of cheap food may be drawing to a close

Reuters poll: Higher grain prices will persist, spurring more global unrest

By KT Arasu

Reuters

30 Jan 2011

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.

U.S. corn, soybeans and wheat prices -- which surged by as much has 50 percent last year and hit their highest levels since mid-2008 -- will dip by at most 5 percent by the end of 2011, according to the poll of 16 analysts.

The forecasts suggest no quick relief for nations bedeviled by record high food costs that have stoked civil unrest. It means any extreme weather event in a grains-producing part of the world could send prices soaring further.

The expectations may also strengthen importers' resolve to build 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.

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 U.S. are enough to correct the deficit in inventories. ...

Quote:

"We are not in a good situation going into February and March in China and in the U.S., so wheat is on the verge of a real scare," grains analyst Terry Roggensack of The Hightower Report in Chicago, said.

http://www.msnbc.msn.com/id/41311106/ns/business-retail/

[phkrause]

I never knew we were ever in an era of cheap food! or anything for that matter. It seems anytime someone even sneeze's some price for something goes up. :(

[Woody]

Yes pk. Everything is going up except for our Social Security which Obama has frozen to pay for his bail outs and ObamaCare.

[phkrause]

I do agree but I think SS has been being tampered with for a long time. Its funny how they want to mess with SS but they don't want to change there retirement age or the amount of pension they receive.

[Dr. Shane]

If the price of corn and soy go up, wouldn't that be good for the US economy since those are big export crops?

[Gerr]

Well, if it gets real bad, I have a half acre in the back to grow food in. Had a nice garden last year.

[Dr. Shane]

Food isn't going to get too expensive for Americans. The increase in food cost will hurt those in developing countries. The worst thing that will happen to an American is that he or she may have to get rid of cable or put off buying a new wardrobe. Adventists that are vegetarians and don't live on processed meat substitutes are not spending much on food. Those basic items like potatoes, corn, whole grain pasta, rice, legumes, tomatoes, onions and cereal are likely to go up but I doubt we will see more than a 10% increase over a year unless overall inflation just takes off. That is a possibility if Wall Street discovers how much actually money the Federal Reserve has just been printing.