DES MOINES, Iowa-(AP)--Midwestern floods may not contribute as much to food inflation as was feared. Corn prices fell Monday after the government surprised traders, reporting 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 distribution and fuel costs.
Farmers will harvest nearly 9 percent fewer acres of corn this year than last year, in part because of Midwestern flooding that has damaged a portion of the crop, the government reported.
But the latest USDA figures also showed that farmers had planted more than a million additional acres of corn than they had expected to plant in March, which may remove some of the inflation potential out of the floods.
The U.S. Department of Agriculture said farmers expect to harvest 78.9 million acres of corn, down 8.8 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 had anticipated planting in corn when asked about it 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, which were about $6 a bushel in early June and rose to about $7.60 last week, dropped nearly 30 cents to about $7.25 on the Chicago Board of Trade.
Soybean stocks reported at 676 million bushels were slightly lower than expected and yield-reducing weather problems also could have a major impact on soybean prices, said Jim Bower, grain analyst for Lafayette, Ind.-based Bower Trading.
July soybeans were trading just above 6 cents higher Monday at $15.88.
