Consumers insulated from high corn prices

By Christine Stebbins

CHICAGO (Reuters) - U.S. consumers should see very little rise in their grocery bills, even as corn futures have reached 10-year highs on increased demand for grain from green-fuel refiners, the head of Informa Economics said on Wednesday.

"The consumer over the years has seen very little impact from such commodity extremes," Bruce Scherr, chief executive of analytical firm Informa Economics, told the Reuters Global Biofuel Summit in Chicago. His Memphis-based firm specializes in agricultural research.

Meat packers, wheat millers and other processors of food tend to take the heat of higher commodity input costs first, Scherr said.

"Packers, bulk processors, millers, crushers and the like -- they are the shock absorbers of that within the value chain. The consumer has tended to be relatively insulated for at least the last 10 to 15 years," he said.

The possibility of higher food prices continues to surface as more and more crops such as corn and soybeans -- traditionally used as livestock feed or as ingredients in food products -- are being turned into ethanol and biodiesel.

This season alone, 20 percent of the U.S. corn crop will be used to produce more than 5 billion gallons of corn-based ethanol, up 14 percent from the previous year. Current government outlooks point to the U.S. ethanol industry needing at least 1 billion more bushels of corn to meet 2007/08 demand from this season's 2.15 billion bushels.

The outlooks pushed corn prices to their highest levels in a decade on Wednesday. Corn at the Chicago Board of Trade for March delivery CH7 reached $4.20-1/2 per bushel. Corn prices have been rising over the past year. Green-fuel refiners and food providers have been jockeying for supplies.

Two of the most volatile periods for commodity prices occurred in the past 10 years. In the summer of 1996 corn hit an all-time high of $5.54 per bushel and in 1998 hog prices tumbled to $8 per hundredweight, the lowest in decades.  Continued...