Macquarie: The Drop in Corn Values Is Enough to Depress Food Prices in 2014

I debated whether to use "deflation" in the headline but checked the OECD stat bank which lists the food component weighting of U.S. CPI at 8.6%. The impact of food alone only strips 0.82% off the current 1% headline inflation number i.e. still positive albeit barely.
If anyone should care to double check the weighting at the source here's the BLS.

From Agrimoney:

A slump in values of the likes of corn and soymeal will feed through into a fall in food prices for a third successive year in 2014, before a small recovery kicks in in 2015, Macquarie forecast.

The bank, launching its own food price index, said that food prices would fall by 9.6% next year, only marginally short of the 10.9% expected for 2013.

However, prices will return to growth in 2015, of 2.8%, with values rising across a range of agricultural commodities, with soymeal, wheat and cocoa notable among exceptions.

"The index entered the downside in 2012 and will stay in this overall bearish trend until 2015, when we expect both agricultural and soft [commodity] prices to recover," Macquarie said.

Corn to fall

The prospects for prices of feed ingredients, which Macquarie is using in its index as a proxy for meat values, look particularly poor for next year, with losses for corn and soymeal forecast at more than 20%.

"The animal feed components will again drive the index lower," said the bank, which is relying largely on futures, rather than physical, prices in compiling the index, called the MacPI.

However, staple grains, a segment including rice and wheat, will be the weakest performer in 2015.

"All commodity groups, except staple grains, should finally turn bullish by the end of 2015, with the animal feed and sugar components contributing the most to the MacPI recovery."...

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