Food Costs Remain High Despite Bumper Harvest

Even though USDA is predicting record amounts of wheat and oilseeds this year, global demand for grain is so high that even bumper harvests won’t deflate the ongoing grain-price rally that has been inflating retail food prices, The Wall Street Journal reports. 

USDA expects prices of wheat and soybeans to gravitate around levels that are roughly twice as high as what a generation of food executives has grown up considering normal, the article said. Demand for grain is also strong partially due to economic growth in the developing world, giving millions of people the means to afford richer diets.  And, due to the low value of the dollar, U.S. ag exports are forecast by the USDA to climb 32.5% to $108.5 billion for the year ending Sept. 30.  The U.S. is exporting 61% of its wheat and 44% of its soybeans.  The volume of U.S. exports of pork, beef and poultry are forecast to jump 29% this year from 2007.

Despite the arguments on whether or not the demand for ethanol is leading to the higher cost of food, higher oil prices are encouraging the production of ethanol fuel.  Ethanol makers are forecast to consume 4.1 billion bushels of the new U.S. corn crop, up twice as much from two years ago.