Report: Food prices to increase in 2011

Tuesday, March 8, 2011

COLUMBIA, Mo. -- A 4.2 percent increase in food prices and record farm income are likely to occur during 2011, according to new data released to Congress by the University of Missouri.

For more than a quarter century, economists with Missouri's Food and Agricultural Policy Research Institute have delivered a baseline report for the agricultural economy to Congress.

The report helps orient each year's policy discussion, and on Monday, the FAPRI team gave lawmakers their 2011 baseline projections.

"Net farm income may near $100 billion in 2011 as higher commodity prices outpace increases in production expenses," according to the report.

Near-term prospects are particularly bright for corn, wheat, soybean and cotton producers."

Food inflation should level to 2 percent, in line with overall inflation, by 2012, but higher energy costs atop higher prices for feed should help to fuel this year's steeper jump, according to staff remarks recorded in a FAPRI news release issued Monday.

"Tight supplies [of corn soybeans and cotton] have contributed to higher prices," FAPRI director Pat Westhoff said in the release. "U.S. wheat supplies are not as low, but wheat prices are supported by corn prices and strong export demand."

The 45-cent per gallon ethanol blenders' tax credits scheduled to sunset at year end may result in lower corn demand, he added, and analysts will watch corn yields with great interest to determine if poor yields will further tighten stocks or a bountiful harvests eases tight stocks.

FAPRI projected corn prices of $5.32 per bushel for the crop now in the bins and $5.03 for next fall's crop. The team noted the 2007's crop $4.20 per bushel was the previous record.

For soybeans, FAPRI said $11.70 per bushel for current crop and $12.53 for next fall's, with prices expected to remain strong through 2020.

Feed costs will interfere with hog profits until 2012 or 2013, while milk returns are predicted to remain at historic lows with cow numbers dropping until stabilization around 2020.

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