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http://biz.yahoo.com/ap/080111/usda_report_commodities_wrap.html?.v=1


USDA Projects Higher Grain Costs
Friday January 11, 4:11 pm ET
Food Companies See Little Relief in USDA Report, Department Predicts Higher
Grain Prices

NEW YORK (AP) -- Food companies, already hurting from high grain prices,
were hit with more bad news this week in a U.S. Department of Agriculture
report predicting higher prices for corn, wheat and soybeans.

In the report released Friday, the USDA projected wheat prices for the
2007-2008 season would be about 25 cents higher per bushel than it expected
last month.

The department also said a smaller-than-expected amount of hard red winter
wheat has been planted, which led to more concerns about supply. Wheat
already hit record prices in 2007 on supply concerns after bad weather
abroad damaged the crop.

Wheat for March delivery fell 2 percent this week to close Friday at $9.125
per bushel

High wheat costs affect all food makers and can hit cereal companies
particularly hard. Food makers in general are struggling to deal with
higher commodity costs and have had to raise retail prices as a result.

Also in the report, the USDA projected corn prices would be 35 cents higher
per bushel than it estimated last month and boosted estimates for soybean
prices by 65 cents from its December prediction.

The USDA also forecast a drop in world production of soybeans, which led to
supply concerns and a sharp rise in the price of soybeans Friday.

The price hit an all-time high of $13.1025, beating the previous record of
$12.90 set in 1973. For the week, March soybean futures rose 3 percent to
close Friday at $13.05 a bushel.

High prices of soybeans can be a big problem for meat producers, because
the crop can be used to make animal feed. Corn is also used to make feed,
as well as the alternative fuel ethanol. Corn has skyrocketed to record
high levels due to demand for the fuel.

With the price of both corn and soybeans soaring, meat producers like Tyson
Foods Inc. and Pilgrim's Pride Corp. have seen higher costs cut into
profits.

Shares of Tyson Foods rose about 1 percent for the week, closing at $14.12
Friday. Pilgrim's Pride shares, meanwhile, rose about 0.6 percent to close
at $25.15.