U.S. farmers are expected to boost the size of this year's corn crop, potentially easing global food inflation.
The Agriculture Department reports that farmers intend to plant 92.2 million acres of corn this spring, a 5 percent increase over last year. That would make it the second-biggest corn crop since 1944, after a record-setting planting in 2007.
Grain prices are at their highest levels since the food crisis of 2008. New production will help ease concerns over a supply pinch. Worries over a shortage have doubled the price of corn since last summer, from $3.50 to more than $7 a bushel. The high prices are encouraging farmers to plant more corn.
While Thursday's report has calmed markets in the short-term, analysts caution that the increase in corn acres is hardly enough to return grain prices to their low levels of just six months ago. Prices will likely stay elevated because of increasing demand for grain from a rebounding U.S. ethanol industry and exports to middle class consumers in Asia.
The government said earlier this year that corn reserves are at their lowest level in 15 years, a tiny surplus that leaves markets jittery. Prices could easily jump from a relatively minor supply shock, like flooding in the Midwest.
Still, the extra corn production expected this year is already bringing prices down, if only slightly. The price of corn fell this week in anticipation of the crop report, dropping to $6.60 a bushel Thursday morning.
Some of the increase in corn acres comes at the expense of this year's soybean crop. Farmers intend to plant 76.6 million acres of soybeans, down 1 percent from last year. Soybean prices rose slightly to $13.78 a bushel Thursday.
It can take months for the price of grain to filter through the cost of groceries. That's because ingredient costs account for just 10 percent of the price of the processed food Americans buy.