USDA: Corn supplies jump, easing shortage worries

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ST. LOUIS (AP) — Corn supplies are projected to be higher than

expected this fall. A bigger crop would ease concerns of a grain

shortage and could slow food inflation later this year.

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The U.S. Agriculture Department said Tuesday that 880 million

bushels of corn will be left over when the harvest begins. That’s

an increase from the previous estimate of 730 million

acres.

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Higher corn prices led farmers to plant the second biggest corn

crop this year since World War II.

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More expensive grain has led to food price increases this year. It

could ultimately make everything from beef to cereal to soft drinks

more expensive at the supermarket. For all of 2011, the USDA

predicts food prices will rise 3 percent to 4 percent.

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News of the big corn crop brought down global corn prices 20

percent over the last month. A huge harvest in August could

ultimately slow food inflation. It typically takes six months for

changes in commodity prices to affect retail food prices in the

U.S. Analysts say consumers could see some relief at the

supermarket by early 2012.

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Farmers saw corn futures rise, so they switched their acreage into

corn from other crops like soybeans. The size of this year’s corn

crop will be 92.3 million acres, about 9 percent larger than the

average annual corn crop over the past decade. The only crop bigger

in the past 67 years was planted in 2007.

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Farmers chose to plant corn at the expense of this year’s soybean

crop. They planted only 75.2 million acres of soybeans, about 3

percent less than last year. Farmers have a limited supply of good

farmland and usually trade one crop for another on their

acreage.

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Higher corn prices make soybeans and wheat more expensive because

farmers plant less of them.

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The price of corn is a driver for food inflation because the crop

is an ingredient in feed for poultry and livestock, and a staple in

many processed foods. When corn prices rise, food processors and

grocers pass along the higher costs to the consumer.

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A bigger crop doesn’t guarantee lower food prices. A drought or

flood could limit the size of the harvested crop. Many of the acres

planted this spring were on marginal land that won’t yield much

grain. Many farmers planted during wet weather just because they

knew they could get the crops insured.

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