Grain prices hitting record highs

Topeka Capital-Journal, The, Dec 22, 2007 by Michael Hooper

By Michael Hooper

THE CAPITAL-JOURNAL

Commodity prices have soared in recent weeks as worldwide supply struggles to keep up with growing demand for wheat, corn, soybeans and milo, a commodities broker said Friday.

The passage of a federal energy bill earlier this month provided strength to prices for corn, milo and soybeans, said Jamey Kohake, commodities broker with Paragon Investments, Silver Lake.

The bill calls for a five-fold increase in renewable fuels, including ethanol, to 36 billion gallons by 2022.

Wheat prices for March delivery hit a record $10.19 per bushel on Monday at the Kansas City Board of Trade, partly because of concerns about supply shortages worldwide.

"We are entering a new price level for wheat," Kohake said.

He said the past wheat crop in Kansas was poor because of a freeze last April. Drought in Australia reduced its wheat supply. Kohake said the 2007-08 wheat production has been forecast at 602 million metric tons, below consumption of 616 million metric tons.

"Supply is the tightest in 30 years," he said. "There is no room for error growing any crops right now."

If bad weather hurts the wheat crop again in 2008, ending stocks will go lower and supply will be short, Kohake said.

When farmers produce a record corn crop, the price usually drops because supply will be higher. But not this year. Farmers produced a record 13.1 billion-bushel corn crop in 2007, yet prices remained strong and actually increased after harvest.

A contract for corn with March delivery sold for $4.43 per bushel this week at the Chicago Board of Trade.

"We're at 11-year highs on the corn," Kohake said.

Bean prices also have soared.

"We're at 34-year highs on the beans," Kohake said. A contract for March delivery of soybeans sold for $11.96 per bushel at the Chicago Board of Trade this week.

Kohake said most of the farm income will go back into the economy. Farmers are looking to add acres to their operations even as land prices increase. More acres will require additional machinery.

Those who scoffed at land prices of $1,500 per acre several years ago are paying $3,500 per acre today. Kohake said he has a client in Iowa who paid $6,500 per acre for farmland.

Michael Hooper can be reached

at (785)295-1293 ormichael.hooper@cjonline.com.