Cheaper food prices depend on the weather

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CONSUMERS can’t bank on a year of cheaper food, despite predictions of bulging grain crops in the US, according to analysts.

The next few months will be crucial in determining prices, as weather conditions will dictate the size of the harvest.

“There’s not enough assurance here yet of lower grain prices in the long run to start marking down those food items,” said Steve Meyer, president of Paragon Economics.

The US Department of Agriculture, in a report issued last month, forecast that US growers will harvest a record 14.6 billion bushels of corn and a record 3.4 billion bushels of soybeans.

The USDA also said corn inventories on March 1 were eight per cent higher than traders expected, sparking the biggest weekly loss in corn prices in 21 months at the Chicago Board of Trade. Prices are down 25 per cent since reaching a record high in August.

Investors have been turning their backs on commodity index funds, which take long positions in a range of commodities including grains, due to higher returns offered by equity markets.

However, if the US produces a large corn crop in 2013, sending grain prices lower, it will take two years before cheaper feed prices impact beef prices, Mr Meyer said.