Grocery store prices likely to rise
By David Roeder Business Reporter January 13, 2011 8:31AM
Updated: September 24, 2012 6:25AM
A government report unexpectedly showed U.S. grain supplies tightening Wednesday, causing a surge in commodity prices and raising expectations for inflation at the grocery store.
Futures prices for corn and soybeans jumped about 4 percent after the U.S. Department of Agriculture said production of those key crops fell in 2010. Analysts said prices also will be pushed higher in meat markets, where live cattle already is trading at record levels per pound.
“For many shoppers, this almost comes at the worst time,” said Robert Goldin, executive vice president at the food consulting firm Technomic Inc. He said prices also will be pushed higher by food producers’ rising energy costs.
But Goldin said many stores will go heavy on sales to gain business at the expense of the competition. “Look for a lot of dealing and discounting, because that’s what consumers are shopping today,” he said.
March corn futures rose 24 cents to $6.31 a bushel at the Chicago Board of Trade, where March soybeans added 58 cents to close at $14.15 a bushel. The crops hit their highest prices in 2½ years.
The USDA said corn production dropped 5 percent in the United States last year and that soybean production was off 1 percent, mostly on weather setbacks. But the impact was in year-end stockpiles, which hit historically low levels.
Traders concluded that if developing countries keep buying U.S. production, supplies will get tighter. Another factor is the record level of ethanol production, which draws a substantial share of the corn crop.
“I do think we’re going to start seeing food inflation, and it’s not only about food but about what happens to oil too,” said market analyst Phil Flynn of Pfgbest Research.