Food Prices Forecasted to Continue Their Rise


Food Prices Forecasted to Continue Their Rise

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As the world economy struggles to recover, the cost of food and other commodities is on the rise.

Food prices will continue to rise, but at a more moderate pace than the increases seen lately, Deere & Co. (DE) Chairman and Chief Executive Sam Allen said Tuesday.

Allen said the world’s growing population and the expanding appetites of people in developing countries will stoke elevated demand for grains, meat and poultry for years to come.

“Are food prices going up? Yes, I think they’re going to go up at moderate levels, but not at the exponential levels” that some people have predicted, Allen said during remarks at the Executives Club of Chicago.

U.S. corn prices reached an all-time record level earlier this year as corn supplies shrink in the face of rising demand, particularly from developing countries such as China.

Allen said commodity prices will retreat at some point as supply and demand levels become more aligned, but he added that the market lows in the future will probably be higher than the lows of the past 20 years, leading to permanently higher prices.

As a result, Allen said farmers should see higher incomes, providing them with means and the incentives to increase their investments in machinery, land, fertilizer and technology to expand their yields.

“The damper to keep [commodity prices] from going too high is that farmers will invest” in more production, Allen said. “By doing that, it will increase the supply.”

Deere, based in Moline, Ill., is the world’s largest manufacturer of farm machinery by sales. Allen, who has headed the company since 2009, has set a goal of doubling Deere’s annual sales to $50 billion by 2018 by increasing equipment sales outside of the U.S. and Canada.

Article – WSJ

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