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Submerged Midwest farms mean higher food prices

Iowa's waterlogged corn may not be knee high by the Fourth of July, as an old saw goes, but food prices at home and abroad almost certainly will shoot up.

Flooding that has inundated large parts of the U.S. corn belt could contribute to substantial price increases in bacon, ham, buffalo wings and other products from corn-fed hogs and chickens. And developing countries where corn is a dietary staple may feel an even greater pinch because they rely so heavily on U.S. imports.

The impact on food prices "is going to be significant or major,'' predicts David Pimentel, a professor of agriculture sciences at Cornell University.

The United States is the world's leading corn producer, and much of that corn is grown in states hardest hit by the recent flooding — Iowa, Minnesota, Illinois and Indiana.

In Iowa alone, "about 16 percent of cropland has been underwater during the last couple of weeks,'' says Chad Hart, an agriculture economist at Iowa State University in Ames, one of the few dry places around. "That's not to say it's destroyed; we don't know yet. A lot of this corn can survive being underwater and it depends, too, on how much silt is left over on top.''

Pricey future

Still, the Midwest flooding is among the factors pushing corn prices from about $4.50 a bushel this time last year to a record $7.92 now, with some experts saying they could hit $10. For consumers, that will mean more price increases in a year that has already seen the cost of the typical urban food basket jump 4.2 percent.

"It will have some impact on us (in the United States) though arguably not as much as some might think,'' Hart says of the flooding. "When you look at a typical 18-ounce box of corn flakes, there's less than 15 cents' worth of corn in that thing. You can have a sizable jump in corn, and it doesn't impact the cost of corn flakes as much as other costs embedded in there, including transportation and all the grocery store overhead.''

But Pimentel of Cornell said prices of chicken- and pork-based foods could rise 50 percent because of higher feed costs. For years, major U.S. meat- and poultry-producing companies have enjoyed what some experts say are unrealistically cheap, subsidized corn prices.

The run-up in corn prices could have a bigger effect on foreign countries, including many that have experienced recent and sometimes deadly food riots. Developing nations, in particular, often import a significant amount of their basic foodstuffs.

"For a lot of African nations, corn tends to be their staple grain so it's a much larger portion of their diet,'' says Hart of Iowa State. "They're going to get impacted at a much greater level than in Southeast Asia, where rice is their staple.''

Chain reaction

Yet another factor affecting global food prices has been the push for greater biofuel production as gas prices soar. Many U.S. farmers stopped planting wheat and switched to corn for ethanol, driving up the cost of bread and other baked goods made from wheat flour.

The impact has been especially severe in Egypt, which imports much of its wheat from the United States. A doubling of bread prices has sparked nearly daily riots by poor Egyptians, who spend 60 percent of their income on food.

The Midwest flooding also has helped drive up the price of soybeans, used in cooking oil and animals feeds, to a record of almost $16 a bushel. After Brazil, the United States is the world's largest producer of soybeans, and exports much of its output to China and Japan.

"Corn and soybeans are two of our most important and valuable crops,'' says Cornell's Pimentel.

The surge in commodity and fuel prices has replaced the credit crunch as the biggest threat to the global economy, finance minsters from the Group of Eight developed nations recently warned. The chairman of Nestle SA, the world's largest food company, predicted that high prices are here to stay though they may recede somewhat from their peaks.

The United Nations wants developing countries to become more self-sufficient in food production, as many were before they eliminated tariffs and other protections for their own farmers.

"These countries need to reinvest in their agriculture, and as a global community we need to help them do that,'' says Ben Lilliston, communications director of the Minnesota-based Institute for Agriculture and Trade Policy. "This kind of global market system can cause a lot of pain when you see these kinds of price increases.''

Susan Taylor Martin can be reached at susan@sptimes.com.

Across the menu

Corn

The cost of bacon, ham and other pork products will go up because hogs are eating more expensive corn.

Soybeans

The cost of cooking oil and margarine could rise because they are made from soybeans, now at a near-record $16 a bushel.

Wheat

The cost of bread has risen because wheat supplies are tight as farmers switch to planting corn for ethanol.

Pain in the pantry

Prices for staples have been climbing sharply for the past year, as statistics from the Department of Labor's Consumer Price Index show. These figures compare prices from May 2008 with May 2007:

Broccoli: Up 17 percent

Milk: Up 15 percent

Bread: Up 15 percent

Chicken: Up 7 percent

Submerged Midwest farms mean higher food prices 06/16/08 [Last modified: Tuesday, June 17, 2008 9:55pm]
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