US drought may worsen global food prices

(AFP)

 

Forecasters are worried that a major drought in the US will further squeeze tight global supplies amid soaring food prices.

With its last major drought in 1988, the Midwest has reached its average span of 18.6 years between droughts.

If a drought brought on a major crop failure in the United States, the world’s breadbasket, it would wreak havoc on global food prices, already at record levels.

A drought could push the price of corn to $8 to $10 a bushel, said Ron Plain, a professor of agricultural economics at the University of Missouri. May corn on the Chicago board of trade was at $5.82-1/4 a bushel at midday on Friday.

“Immediately, there would not be a whole lot of impact on the US,” Plain said. “The way we’d be impacted would be through meat, milk, and egg prices.”

A spike in corn prices would hit US livestock producers especially hard since they use corn to feed most of  their animals.

As a wealthy country, the United States could weather higher food prices and declining supplies. But as the world’s largest exporter of corn, America’s recovery may come at the expense of the rest of the world.

The United States exported 2.13 billion bushels of corn in 2007, but a drought would force America to purchase corn back from the international market, leaving other countries scrambling for food staples.

“We would buy food out of the mouths of the rest of the world,” Ramsey said.

World grain stocks are already at historically low levels. Further shortages would intensify competition between importing countries for available grain supplies, said Lester Brown, president of the Earth Policy Institute.

Governments would probably have to ration food, said Brown, warning that levels of world hunger would rise.

“There are hundreds of millions of people in the world who are on the lower rungs of the global economic ladder,” he said.

In the event of a crop failure, the US Government would need to ease cost pressures from livestock producers by offering feed assistance programmes or providing loans.

The government would also have to roll back its corn-based ethanol usage mandate, which requires the use of nine billion gallons of ethanol in petrol in 2008.

Considering that statistic and current weather conditions, Iowa State University extension climatologist Elwynn Taylor said the corn belt has a one in three chance of drought this year.

“We do have to be prepared,” Taylor said.

The Midwest’s chances of drought are exacerbated by La Nina, an unusual cooling of Pacific Ocean surface temperatures that can trigger widespread changes in global weather patterns. If La Nina has not dissipated by July, Taylor saw a 70 per cent chance for US corn yields below the trend of 150.6 bushels per acre.

 

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