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Des Moines, Iowa • A surprising drop in the U.S. corn and soybean crop sent grain prices surging to their highest levels in 2½ years Wednesday. The price increases stoked concerns about higher food prices and tighter supplies of feedstock for food and biofuels.
Wet weather and abnormally high temperatures contributed to lower U.S. corn production in 2010, according to a report from the U.S. Agriculture Department. The report also showed declines in soybean, wheat and grain sorghum production.
March corn futures jumped 4 percent to settle at $6.31 a bushel. Soybean prices jumped 4.3 percent to $14.15 a bushel.
The report confirmed traders' fears that historically low stockpiles of grain and oilseeds could leave little buffer in coming months as demand rises with a growing global economy. Prices reached their highest points since the financial crisis of 2008 caused a collapse in global demand for food and fuel.
It can take months for higher grain prices to work their way to the grocery store. Raw ingredients are just a fraction of the cost for processed foods.
But companies like Hormel Foods Corp. have already announced price increases of more than 3 percent this year. Higher grain costs will put more pressure on them to pass costs along to consumers.
U.S. corn production dropped 5 percent in 2010 to 12.4 billion bushels. Still, it remained the third-highest output on record. The record was set in 2009, when 13.2 billion bushels of corn were harvested.
At issue is the amount of grain being carried over from year to year. That surplus creates a buffer for global markets. The report shows that corn stockpiles are among the lowest levels ever recorded, at just 5 percent of the total corn used, said Chad Hart, an Iowa State University grain marketing specialist.