Too little, too late?

The AP reports on the breakthrough in the salmonella case.

Restaurants, consumers, and the tomato industry had reason to breath a sigh of relief this week as two kinds of peppers found in Mexico were linked to the ongoing search for the source of the salmonella outbreak. While officials fell short of completely vindicating the tomato, they did report that no tomatoes have tested positive for salmonella. The cause of the outbreak is being reported as "contaminated irrigation water."

Mexico is denying that they are the source of the outbreak, saying that the positive tests were only preliminary findings. American produce industry executives expressed their dismay at a hearing on Wednesday. They argued that the investigation took too long to get to the "smoking gun." The LA Times reports:

Produce industry insiders, many also testifying at the Wednesday hearing, criticized what they called an expensive, inept investigation that had little transparency and failed to engage business owners.

One executive said his company, which ships tomatoes and other produce across seven states, had lost as much as $18 million since the outbreak began. Members of the Irvine-based Western Growers Assn. have collectively lost $13 million, said Henry L. Giclas, one of the group's vice presidents.

"I don't know how they could call it a breakthrough when our industry's already been broken," he said after testifying.

In other commodity news, corn prices dropped another 3.7%, with soybeans falling 2.8% for the week. While Congress failed to come to an agreement on what to do about oil prices and speculators, it was the weather that brought about the price decline. Thunderstorms rolling into the Midwest prompted the favorable prediction that despite the flooding earlier this year, corn production could still be on production schedule.

Cheaper corn might not directly translate to help for the suffering restaurant industry. The Chicago Tribune reported on the change in consumer spending habits:

In the restaurant business hard times have touched off a flurry of trading down to cheaper outlets.

That's a plus for McDonald's, which is testing a higher price for the double cheeseburger that anchors its dollar menu, and a minus for casual-dining chains. Bennigan's, for example, abruptly shuttered hundreds of its outlets last week.

At the same time, Americans are eating at home more regularly, a help to packaged-food companies at the expense of restaurants.

Further Reading:

San Fransisco Chronicle on criticism on US probe into the salmonella outbreak.
MarketWatch on corn prices creating a buying opportunity.
Seattle PI on the year long moratorium against fast food restaurants in Los Angeles.

A Small Amount of Good News for Corn Prices

Despite the report of what can almost be considered a statement of the obvious by Purdue University, corn and sugar prices continued their market drop. While corn prices were up slightly on Friday by .8%, prices were down by 6% for the week, and Market Watch reported that prices have fallen nearly 20% for the month of July. The cause of the decline?

Weather in the Midwest corn belt is expected to be positive for the length of pollination period from July 20 to July 30, according to AccuWeather.com. The period marks the most critical phase for determining how much corn each plant will yield.

The Cattle Network, however, said to proceed with caution before getting excited about the price drop. They say the "Summer Price Slide" may be coming to an end:

Buying of physical commodities is picking up. Wheat is due for a seasonal post-harvest price upswing. Speculators appear to be sitting tight on remaining long positions. Other traders are nervously covering short positions, feeling the markets may be oversold. Traders will be watching weather reports closely for the rest of the summer.

Back to the Purdue study, which found that a mixture- not one defining factor- is causing food prices to rise. The IndyStar published a comprehensive breakdown of the findings:

Four reasons for rising food costs

High oil prices
As the price of oil goes up, so does demand for ethanol, which raises corn prices. Increased ethanol demand also makes other farm supplies like fertilizer, diesel and propane more expensive.

Weak dollar
Oil and agricultural commodities are priced in dollars. As the dollar gets weaker, these products become cheaper for other countries to buy, which increases demand.

High consumption, low production
Worldwide, consumption has grown faster than production since 2000. This is not due to increasing populations in China and India, however, as the two giants are agriculturally self- sufficient

Weather and crop diseases
Because supplies are low, any hiccups in production -- from last year's drought to this year's floods -- have a greater effect on food prices.

Wally Turner, one of the economists who contributed to the report, said to look for prices to increase and hold for at least another two years as farmers increase planting to keep up with greater demand.

Further Reading:

The International Herald Tribune on the US Commodity boom losing steam.

Midwest Flooding = Higher Meat Prices

The world continued to watch the Midwest this week for signs that the worst of the flooding was over. Although MSNBC and other outlets are reporting that thunderstorms are disappearing from the forecasts, the effect the flooding will have on food prices is on everyone's mind.



While the Associated Press had a positive outlook on corn, pointing out that the crop prices fell on Friday with favorable weather in the Midwest, the Times Online UK Edition reported that experts are predicting the US will produce 15% less grain than last year due to the flooding. Coupled with a greater demand for corn for ethanol, and an increased cost in soybeans, some farmers have begun selling off breeding animals to offset costs. More from the Times article:

Tyson Foods, the giant Arkansas-based meat producer, has predicted that retail chicken prices will have to jump by double-digit percentages in 2009 for poultry processors to recoup their feeding costs. The cost of food is increasing at its fastest pace in 18 years.

The Chicago Sun-Times echoed this sentiment by reporting:

Pork prices could be up as much as 30 percent next year because of production cutbacks, said John Lawrence, an economist at Iowa State University. Prices of beef and poultry products are likely to be at least 10 percent higher by the end of this year, he said.

While these are just estimates, the USDA plans on releasing their official acreage report on June 30th (a detailed press release can be found here). They are quick to point out, however, that the report will not include the most recently impacted areas of the Midwest Floods. They will conduct more research in July, and an updated report will be available in the August 12th Crop Production Report.

Further Reading:

Bloomberg on the possibility of rising wheat prices.

Bad Days for Tomatoes and Corn.

Food was front and center in the news this week. Flooding, salmonella outbreaks, and soaring oil prices topped headlines, and while wheat prices fell, the general mood on any possible relief for raising food costs was somber.

At the beginning of the week tomatoes were pulled off of grocery store shelves and restaurant menus after the FDA issued a Salmonella warning for raw red tomatoes. So far over 200 people have become ill, and the FDA is still trying to determine the source of the outbreak.

In the Pacific Northwest, grocery stores and farmers were quick to respond to the warning. The News-Review Today reported that places like Sherm’s Thunderbird pulled its tomatoes until learning their source was safe, while the Dairy Queen in Roseburg joined chains like Mc Donalds and Chipotle, stating they would keep tomatoes from their hamburgers at least through the weekend.

While Oregon's Caruso Produce was cleared by the FDA, other farmers were not having as easy of a time. Michael Stuart, president of the Florida Fruit and Vegetable Association, spoke to NPR about the effect the warning was having on the growers:

They're extremely frustrated in that business has basically ground to a halt at this point in time. We're anxiously awaiting a determination by the Food and Drug Administration as to what the specific source of this problem is. And until that happens, quite frankly, we're dead in the water.

You can read the entire NPR piece here.

As the nation threw out tons of possibly contaminated tomatoes, commodity watchers kept an eye on corn as prices rose all week to end at $7.357 per bushel; a new record. Major flooding throughout the Midwest destroyed thousands of acres of crops, and with forecasts predicting more rain, analysts are predicting prices could surge above $8.00 per bushel.

MarketWatch reported Monday on the already decreased 2009 corn crop, and as the week went on analysts told reporters that the flooding would have major consequences. Chad Hart, an agriculture economist at Iowa State University told the Chicago Tribune that:

Given the flooding we see today, we're likely to see prices go significantly higher based on the weather....This is a significant event. We were already having production issues before this occurred, all across the Midwest. This can have gigantic implications.

Conversely, the National Corn Growing Association's president Ron Litterer released a hopeful statement about the crop:

In Iowa in 1993, record rainfall reached well into the summer months and severely affected the crop that year. That is not the long-term forecast for 2008, and there’s still a lot of the growing season left, so we are hopeful the final results will not be as devastating as it was 15 years ago. While the U.S. Department of Agriculture has recently projected our third-largest crop ever at more than 11.7 billion bushels, we know that the final number depends on how the weather holds.

Thanks to a large surplus of beginning stocks from the record 2007 harvest, we came in with a good supply. We are watching the skies at home and tracking the updates from Washington while working hard doing what we do best – growing corn to help feed and fuel the world.

The long-term effects of the tomato and corn issues are still to be seen, but many experts are warning that we have not seen the peak of rising prices.

Further Reading:

• The New York Times on commodity prices climbing
• The Associated Press on the surge in corn prices
• Reuters on the FDA's slow moving progress on food safety