Food Prices and Weather

Press Release June 17, 2008

Economist Says Up To 16% of
Iowa Grain Crops Potentially
Impacted by Floods
“There may be a rush on short season corn,” says grain farmer Dave Miller, the Iowa Farm Bureau Federation (IFBF) Director of Research and Commodity Services. Miller says according to the latest estimates, floodwaters in Iowa have claimed nearly 1.3 million corn acres and up to two million acres of soybeans.

What will this mean for consumers at the grocery store? Miller says while the price of corn has gone up a dollar and a half in the last two weeks in Chicago, it should not directly impact the price of most of the food at the grocery store. That’s because wheat production is up in the U.S. and globally and that has a larger impact on bread and cereals than corn.

However, since nearly half of Iowa’s corn (and all the by-product of ethanol production) is used to feed livestock, consumers can expect meat prices to fluctuate. “In the short term, pork and beef prices may initially drop as livestock farmers liquidate herds because feed costs are too high for them to hold out. But expect those prices to climb at the meat counter in about six months,” says Miller.

Additional statistics from the USDA show that fuel and marketing costs have the lion’s share of the food dollar - 81¢ according to the latest figures. Even if the price of corn were to double, it should not double the cost of a food item.

As national media and clean-up crews traverse the state, reports speculate the flood of 2008 is worse than the floods of ’93. “It is certainly comparable to ’93,” says Miller. “But, there were more acres that never got planted in ’93 than this year. Although the floods came later in ’93, it was wet throughout the whole planting season and a lot of ground was never fit to plant. This year most of the corn and a significant portion of the soybeans were planted when the floods hit. Farmers have already put a lot of resources into a crop that is now underwater,” says Miller.

Some have speculated that the higher crests on some rivers would make it much worse for farmers, “but six inches of water on a small corn or soybean plant can kill it the same as six feet of water,” says Miller.

The big question now facing farmers is whether to replant. Miller says if it quits raining and the flood waters recede, it’ll take 7 to 10 drying days before they are able to replant. If that happens, farmers can plant short season corn—a faster maturing corn—as late as June 25, 26. Many farmers will plant a soybean crop as late as July 2, “although the risk of frost or other crop problems is magnified by this later planting,” says Miller.

“Iowa has 25 million tillable acres but 16% of it is underwater right now. How much of an impact the potential loss has also depends on the flooding of other states. Meanwhile, wheat growers in the U.S. and globally have responded to higher prices and are set to harvest large crops. Given time for farms to respond to higher prices, food supplies will expand,” says Miller.