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Thursday, August 28, 2014         

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Drought may increase food prices

By David Pitt

Associated Press

POSTED:


DES MOINES, Iowa >>  Some cornstalks in fields around the farm where David Kellerman works stand tall, but appearances can be deceiving. When the husks are pulled back, the cobs are empty. No kernels developed as the plants struggled with heat and drought.

The soil in Kellerman's part of southern Illinois is like dust after less than an inch of rain since mid-April. This week, he and the farmer he works with packed it in. They cut and baled the withered plants to use as hay for their cattle.

As the worst drought in nearly 25 years spreads across the nation, farmers in Illinois and Indiana are finding themselves among the hardest hit. But they are not alone, and conditions are likely to get worse throughout the middle of the country with an unusually hot summer in the forecast.

Almost a third of the nation's corn crop is already showing signs of damage, and on Wednesday, the U.S. Department of Agriculture released yet another report predicting that farmers will get only a fraction of the corn anticipated last spring when they planted 96.4 million acres, the most since 1937.

It's too soon to say how that will affect food prices. The cost of meat is most likely to be affected because corn is used to feed cattle, and its price is usually passed along in the cost of hamburger and steak. But meat prices were already rising and were expected to stay high after last year's drought in Texas forced many ranchers to reduce their herds.

Corn also is widely used as an ingredient — in corn flakes to ketchup, bread and soda pop — but it accounts for a small fraction of their costs compared to such things as transportation and marketing.

A rule of thumb is that food prices typically climb about 1 percent for every 50 percent increase in average corn prices, said Richard Volpe, a USDA food markets research economist.

The government has already predicted food prices will increase this year by as much as 3.5 percent. It won't be clear until the fall, when all the damage is known, how much the crop loss will add to that, Volpe said.






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