A recent National Chicken Council report cites the results of research from University of Missouri Food and Agricultural Policy Research Institute (FAPRI) linking the prices of corn and crude oil.
Industry economists, including Dr. Paul Aho, have previously emphasized the relationship between the two commodities with linkage influenced by diversion of corn to ethanol in the U.S.
FAPRI Co-Director, Dr. Pat Westhoff, said, “Throughout most of 2007 and 2008 there was a strong correlation between corn and oil prices. You could divide the price of oil in dollars per barrel by 20 and get the corn price.”
The implication of linkage is that oil prices above $70 will be correlated to a corn price over $3.50/bushel. Recovery of world economies possibly at a faster rate than that in the U.S. will result in increased demand for corn and soybeans, and, coupled with a low dollar, ingredient prices will be high through 2010.
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