RUSSIAN WHEAT DEAL
American farmers have felt a little too much dj vu lately. This year wheat prices fell to 1980 levels. Corn prices briefly hit a nearly 30-year low.
So it came as something of a surprise when the latest blast from the past turned out to be good news. The United States has agreed to sell wheat to Russia (and donate other commodities) recalling the Soviet wheat deal that sent grain prices soaring a quarter century ago.
That won't happen this time, analysts say, but it will firm up what have been very soft prices. Meanwhile, cattle prices have rebounded. And one of farmers' most important export markets - Southeast Asia - looks a little less wobbly financially.
The result: The gloom over US agriculture is lifting slightly.
Another piece of good news is higher prices at the barn door won't translate into sticker shock at the grocery store. Consumers may see some rise in prices, but it will be delayed well into next year.
Consumers will feel the biggest pinch in beef prices.
"We're on our way," says James Henderson, market analyst for Cattle-Fax in Englewood, Colo. "Beef production levels should continue to decline as we go into 2000 and 2001 and prices should react accordingly."
Already, ranchers have seen cattle prices rise from a money-losing 56 cents a pound last summer to a break-even 63 cents today, he adds. More hikes are likely. And because the price at the ranch plays a big role in the cost at the retail meat counter, beef prices are likely to go higher.
"It will probably be in the second half of next year," says Jens Knutson, economist of American Meat Institute in Arlington, Va. But "nothing particularly scary."
Beef has to compete against other meats, he points out. And since the number of hogs is rising, pork prices definitely are not. (Thanksgiving dinner cooks can rest easy too. Turkey prices won't rise this holiday season, despite lower numbers, because so many supermarkets sell them at a loss anyway to get customers into their stores.)
The impact of the Russian wheat deal remains harder to predict. In the short term, the US Department of Agriculture forecasts the $625 million aid package to Russia will boost domestic wheat prices 10 cents a bushel. That would nudge wheat up from 11-year lows to about $2.55 a bushel, although still far below the $3.38 and $4.30 farmers averaged in the past two years.