CHICAGO — Corn and soybean futures last week rose to their highest levels since July 2008, after the U.S. Department of Agriculture noted that U.S. inventories had fallen to 15-year lows, and projected that the U.S. will produce 93 million fewer bushels of corn in 2011 compared with 2010.
The increase in prices, along with the pessimistic projection, could signal a challenging year ahead for poultry and livestock producers, who use corn and soybeans in animal feed, as well as producers of packaged foods that use corn- and soy-based ingredients.
Rising worldwide demand, combined with last summer's severe drought and wildfires in Russia and heavy rains in Australia, caused significant repercussions throughout world grain markets in 2010. Low grain inventories around the world helped push the United Nations Food and Agriculture Organization's international food-price index to a record high in December.
“There's no room for error anymore,” Dan Basse, the president of AgResource Co., a commodity consultant in Chicago, told Bloomberg news wire. “With any weather issues, we're going to make new all-time highs in corn and soybeans, and to a lesser degree, wheat futures.”
In separate news, the USDA also slashed its January orange crop forecast by 3 million boxes, citing smaller-than-expected fruit and the unseasonably early frosts that hit Florida in December.