June 20, 2008
By Philip Brasher
Des Moines Register/Gannett News Service
WASHINGTON - For consumers feeling the pinch of higher food prices, the flooding of prime Midwest farmland will bring more bad news in supermarkets through next year.
By wiping out corn and soybean crops across Iowa, Illinois and other states, the flood is driving up prices that were already at historic highs and increasing the cost of feed for cattle, hogs and poultry.
Photo: Cattle that were herded onto a porch stay put to avoid drowning Wednesday north of Vinton, Iowa. The town is without power, and the Cedar River is expect to crest at record levels all across the state. (AP)
‘‘I have no choice: going broke or increase prices,’’ said Heinz Kramer, who expects to have to charge more for the pork and beef that he processes at a family-owned company in La Porte City, Iowa.
Pork prices could be up as much as 30 percent next year because of production cutbacks, said John Lawrence, an economist at Iowa State University. Prices of beef and poultry products are likely to be at least 10 percent higher by the end of this year, he said.
‘‘The higher the corn prices go today, the higher meat prices, milk and egg prices will go a year from now,’’ he said.
The Agriculture Department has said that food prices overall would rise by 4.5 percent to 5.5 percent that year, but those numbers are likely to be revised upward in July after analysts get a better idea of the impact on corn supplies.
The inflation estimate was made at a time when corn was selling for $6 a bushel, said USDA economist Ephraim Leibtag. Corn prices rose to $7.46 a bushel Wednesday on the Chicago Board of Trade.
Nearly half of 2007’s corn crop was used for livestock feed. Corn sweeteners and soybean oil are widely used as food ingredients, but they have a smaller impact on retail prices than feed costs have on livestock products.
Food prices are ‘‘absolutely a concern and something that we’re going to be paying close attention to,’’ said White House spokesman Tony Fratto. ‘‘It’s too early to say what the exact impact will be.’’
Whatever it is, it is likely to be more significant in poor regions where corn and vegetable oil are staples. In some countries, people spend as much as 70 percent of their income on food. The United Nations has identified 22 countries that are especially vulnerable to rising prices because of hunger rates and dependence on imports.
| HOW MUCH CORN DO YOU EAT? |
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| Many grocery staples contain corn. Here's how much milled corn it takes to produce them. 18-ounce box of corn flakes: 12.9 ounces of corn 2-liter soda: 15 ounces 1-lb. beef round roast: 2.6 pounds 1-lb. pork boneless chops: 3.6 pounds 1-lb. chicken breast: 2.6 pounds 1 dozen eggs: 4 pounds 1 gallon milk: 1.8 pounds Source: The Corn Growers Association |
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The Iowa Farm Bureau estimates that 1.3 million acres of corn and 2 million acres of soybeans will be lost to flooding this year. That acreage includes land near rivers as well as acreage where farmers couldn’t get into fields to plant or couldn’t re-seed damaged crops.
Farmers can replant crops and still be covered by crop insurance. But coverage levels drop with each passing day, and late-planted crops could face the threat of frost in the fall, said the Farm Bureau’s Dave Miller.
Government options for controlling food prices are limited:
- The Agriculture Department is considering releasing land from the federal Conservation Reserve Program for planting to crops. However, the idea has already been panned by wildlife groups because the land is prime habitat for pheasants, quail, ducks and other wildlife. Some 34.7 million acres of former cropland nationwide, including 1.8 million acres in Iowa, are idled under the program.
- The Environmental Protection Agency is considering a request from Texas Gov. Rick Perry to roll back the nation’s ethanol usage mandate. Refiners are required to use 9 billion gallons of grain ethanol this year. However, economists say that at today’s oil, ethanol and grain prices, it’s still economical to convert corn into fuel without the mandate.
William Horner, chief executive of Naturally Iowa, said the Clarinda-based dairy hasn’t raised prices for its milk, liquid yogurt, frozen yogurt and ice cream products yet.
‘‘We worry about the future,’’ Horner said. ‘‘We’re worried about higher commodity prices for dairy farmers. That will put them in a cost-price squeeze.’’
Naturally Iowa buys all-natural and organic milk from about a dozen dairies in Iowa and Nebraska, Horner said.
Kramer, the La Porte City meat processor, was philosophical about the impact of the floods.
‘‘The market will find its parity. You have to live with it. It’s an uncertain period coming,’’ he said.
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