Food prices are on their way up, and analysts in the United States are expecting even higher increases ahead.
Recent flooding in the US Midwest has exasperated already tight domestic corn and soybean supplies, limiting US farmers' ability to produce enough to meet growing domestic needs.
The US Department of Agriculture estimated corn demand at 12.5 billion bushels. About 5 billion would be used to feed livestock, 4 billion for ethanol production, 2 billion overseas and the rest for other food, seed and industrial uses.
Earlier this month, USDA's latest projections estimated this year's corn crop at 11.7 billion bushels, but this does not account for recent flood damage. Previous years' corn stocks provided a small cushion for the shortfall, but tight supplies will require market prices to go higher to reduce demand.
The government's Consumer Price Index for all food rose 4pc in 2007 after increasing at a rate of 2.4pc annually during the previous two years.
Last week, several analysts increased food price estimates, forecasting for 5-9pc increases this year.
Bill Lapp, president of Advanced Economic Solutions, projects a 9pc increase from 2009 to 2012 as corn reigns as king in the marketplace and drives up other commodity prices with it.
Dave Miller, director of research and commodity services with the Iowa Farm Bureau Federation, said while the price of corn has gone up $US1.50 in the last two weeks in Chicago, Ill., it should not directly affect the price of most of the food at the grocery store.
Wheat production is up in the US and globally, and that has a larger impact on bread and cereals than corn, he said.
However, since nearly half of Iowa's corn (and all of the byproduct of ethanol production) is used to feed livestock, consumers can expect meat prices to fluctuate.
"In the short term, pork and beef prices may initially drop as livestock farmers liquidate herds because feed costs are too high for them to hold out, but expect those prices to climb at the meat counter in about six months," Miller said.
Several livestock representatives last week said the industry is in "round two" of liquidation because feed prices continue to climb.
James Herring, president and chief executive officer of Friona Industries, the fourth-largest US cattle feeding operation, said the public will need to pick up an additional 20pc increase in beef prices by the fourth quarter.
If producers can't pass on that cost, production will have to be curtailed more.
Rod Brenneman, president and CEO of Seaboard Foods, the third-largest pork producer, expects significantly higher prices at the consumer level in late 2008 and early 2009 as fewer supplies of pork are available due to ongoing liquidation efforts.
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