Slow corn seeding pushes price and food concerns

CHICAGO (Reuters) - Weather-related delays in planting the U.S. corn crop could result in smaller yields and lower-than-expected production this year, and that could push record grain prices even higher and exacerbate the already burning debate over using crops for food or fuel.

The United States is the world’s top producer and exporter of corn, which is largely used for animal feed. But with nearly a quarter of the U.S. corn crop going to ethanol production, any decline in yields could tighten supplies at a time when the weak dollar has boosted exports, pushing prices even higher and adding to food inflation.

“There is so much going on you can’t afford to lose any corn acres, and if you look at the last three years we haven’t been above 151 bushels per acre and there is nothing this year to indicate anything different,” said analyst Randy Mittelstaedt of Chicago trade house R.J. O’Brien.

Corn futures at the Chicago Board of Trade surged as much as 4 percent on Tuesday, with an all-time high of $6.60-3/4 a bushel set by the July 2009 contract.

Prices are up roughly 60 percent for the year and a huge 170 percent over the past two years.

The effects are being felt by consumers through higher prices for food items like cooking oil and corn flakes.

Meat companies are also feeling the pain. The largest U.S. chicken producer, Pilgrim's Pride Corp PPC.N, said on Monday its feed costs will rise by more than $800 million in fiscal 2008 ending in September.

The rise in food prices has triggered criticism over the use of corn to produce ethanol.

U.S. legislation passed last year would require 36 billion gallons of renewable fuels to be added to gasoline by 2022.

Presumptive Republican presidential candidate Senator John McCain has joined 23 senators from his party in suggesting that the Environmental Protection Agency waive or restructure mandates requiring increased ethanol use through 2022.

PLANTING PROGRESS LAGS

The U.S. Department of Agriculture on Monday said that only 27 percent of the corn crop had been planted as of Sunday, well behind the five-year average pace of 59 percent.

“The new crop corn balance sheet is already looking tight and they have to get the crop in even if they have to plant day and night,” said Mittelstaedt.

“Clearly we’re at that point of concern and next week’s report will be absolutely critical,” he said, referring to the U.S. Department of Agriculture’s weekly crop report each Monday afternoon that tracks the progress and condition of U.S. crops.

Adding to the worries over lower yields, corn area was already projected to be down 8 percent from last year’s 93-1/2 million acres, the most planted in over 60 years.

Soaring soy prices and high input costs to produce corn led farmers to slash corn area and boost soy seedings this year.

Now producers are having trouble planting corn as excessive rainfall threatens to cut production. The crop must be planted by roughly mid-May to generate maximum or optimum yields.

Farmers are not at the point where they should plant in soil that is not dry enough, as that could cause even more yield loss than seeding a few days late, said Emerson Nafziger, extension agronomist at the University of Illinois.

But if the delays persist, farmers may be forced to plant in less than ideal conditions as the potential for crop damage increases daily in late May and early June.

“What would be considered foolish today may not be considered foolish in two weeks,” Nafziger said. “Yield loss is going to start to accelerate.”