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Higher Cereal Prices Driven By Corn Spike

By Bill Hudson, WCCO-TV

WACONIA, Minn. (WCCO) — On Tim Leonard’s Carver County farm, a nice spell of warm and dry fall weather means he’s just about to wrap up another bumper crop. But even that bumper harvest can’t satisfy a rising world demand for corn and other grains.

Poor growing weather in Russia and Asia have increased demand for imports of U.S. grown grains. That, coupled with the U.S. Department of Agriculture’s lowering of the expected domestic harvest, is fueling speculation in the commodities markets.

“It’s a concern, yes. It’s a concern of mine,” said grocery shopper Tom Burns.

Consumers like Burns will soon see the jump in grain prices reflected in higher cereal prices. Minnesota-based cereal giant General Mills said it expects to increase prices on about 25 percent of its cereal line by Nov. 15. Kraft is expected to follow suit and pass along to consumers the higher ingredient costs.

General Mills hasn’t said exactly how much the increase will be, only that it will range in the low single digits.

“You come in here you, you know, you got a list, you got kids to feed …  it’s really how they price it. It affects us, yes, but then what choice do we have?” said Burns.

While rising corn prices are beneficial to farmers who grow it, it’s bad when it comes time to using it to feed hogs, poultry and cattle.

And that’s sure to show up in the meat isle of grocery stores as well. Consumers can expect to be paying higher costs for poultry, pork and beef.

When asked if higher grain prices beneficial to him as a farmer, farmer Leonard replied, “no, not really, as a dairy farmer, no. I would say not.”

Though trading at around $5.50 per bushel, corn prices are still lower than the record levels reached in 2007 and 2008, when corn surpassed $8.00 a bushel.

More from Bill Hudson
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