End of cheap food era as grain prices stay high: Reuters poll

Fri Jan 28, 2011 12:15pm EST
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By K.T. Arasu

CHICAGO (Reuters) - U.S. grain prices should stay unrelentingly high this year, according to a Reuters poll, the latest sign that the era of cheap food has come to an end.

U.S. corn, soybeans and wheat prices -- which surged by as much has 50 percent last year and hit their highest levels since mid-2008 -- will dip by at most 5 percent by the end of 2011, according to the poll of 16 analysts.

The forecasts suggest no quick relief for nations bedeviled by record high food costs that have stoked civil unrest. It means any extreme weather event in a grains-producing part of the world could send prices soaring further.

The expectations may also strengthen importers' resolve to build bigger inventories after a year in which stocks of corn and soybeans in the United States -- the world's top exporter -- dwindled to their lowest level in decades.

In a sign of more consumer pain on the meat front, U.S. hog futures hit a record high on Friday as South Korea stepped up imports after culling its herd due to disease.

The U.N.'s Food and Agricultural Organization (FAO) pointed to sugar and meat as two primary commodities that helped to lift world food prices to a record high in December.

While grain prices remain below the historic highs of 2008, they could remain stronger for longer this year as intense competition among crops for land use and depleted grain bins make it an even greater challenge to restore equilibrium.

"Even if we have a good year, we are not going to have the inventories we've seen before. I really do think the time of cheap food prices is over, and that's just it," said analyst Chris Mann of Traders Group Inc in Chicago.   Continued...

<p>A French baker carries a bag of flour near freshly-baked traditional bread in Strasbourg eastern France August 6, 2010. REUTERS/Vincent Kessler</p>