991151 Food Glut Helps Consumers But Hurts FarmersNovember 15, 1999Washington - Americans are enjoying some of the smallest food price increases in years thanks to the global glut that is hammering U.S. grain prices and forcing a federal farm bail-out. With the fall harvest winding down, the Agriculture Department lowered its estimates for U.S. corn, soybean and wheat prices by five cents a bushel or more. Farm-gate prices would be the lowest since the agricultural recession of the mid-1980s. Congress enacted a record $8.7 billion in emergency farm aid last month, the second in two years to shield farmers from persistently low prices. A farm- sector recovery was not expected for another year, if then. Grocery prices have notched negligible gains in the past couple of years. The oversupply of grain provided low-cost feed for livestock and stable raw materials for food makers. “Prices have been so modest for the last two or three years, it certainly has been good news for consumers,” said Annette Clauson, the Agriculture Department's food price monitor. “The only price pressure we are looking to occur is in the meat area.” Food prices were likely to rise only 2.1% this year, the smallest increase since 1991's 1.2%, Clauson said. Even with a drop in U.S. beef and pork output, meat price increases will be a modest 2.5% next year, she said. The year-on-year increase was more likely to be around 3%, said private consultant John Schnittker, who foresaw beef and pork output “down sharply,” putting pressure on prices, but offset somewhat by ample supplies of poultry meat. “We have all these big crops,” he said, that will dampen any surges much above three percent. The 1990s have been a decade of generally benign food prices, usually rising around two percent or so a year. The largest uptick was 3.3% in 1996 when grain prices soared and the world feared food scarcity. Nowadays, the concern is an unfettered outpouring of crops. The world was heading toward a fourth year of gargantuan crops, the Agriculture Department said in a pair of monthly reports on U.S. crops and world output. This year's U.S. corn crop was estimated at 9.54 billion bushels, up one percent from a month ago, and soybeans at 2.67 billion bushels, down one percent from a month ago. Both would be the third largest on record. U.S. grain bins were forecast to bulge with more than one billion bushels of wheat, two billion bushels of corn and 395 million bushels of soybeans when next year's crops were ready for harvest. In response, prices plunged at the Chicago Board of Trade, the world's largest commodity exchange. Soybeans for January delivery ended the day at $4.66 a bushel, down 13 cents for the lowest closing price since August 13. December corn was down 5-1/2 cents a bushel, to $1.95-1/4. December wheat closed at $2.48 a bushel, down 5-1/2 cents a bushel for the day and barely a recovery after hitting $2.47-1/2 a bushel, the lowest price for the contract. “It is difficult to see any light at the end of the tunnel. That's all you can say,” said analyst Greg Doud of the consulting firm World Perspectives. There is little reason for prices to increase soon. China had a large supply of corn to export, Doud said, while Australia and Argentina have “significantly larger” wheat crops at hand. Soybean sowings in Brazil and Argentina, the top global growers behind the United States, indicate expanded production. Also in USDA's monthly crop report: * a rare, late-season update lowered the U.S. wheat crop to 2.31 billion bushels, down about 10 million bushels, mostly due to a protracted harvest in the Northern Plains that brought in less durum wheat than expected. * U.S. cotton output was raised to 16.53 million bales, up 100,500 bales from the October estimate, based on higher yields. * U.S. rice was forecast at a record 211.7 million hundredweight, or 6.91 million tons, down slightly from October. With exports flat, the U.S. stockpile would double and prices sink.
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