Magazine article Insight on the News

Drought Drives Up Food Prices: Dry, Hot Weather Takes a Severe Toll on Commodities Such as Grains and Soybeans. (Agriculture)

Magazine article Insight on the News

Drought Drives Up Food Prices: Dry, Hot Weather Takes a Severe Toll on Commodities Such as Grains and Soybeans. (Agriculture)

Article excerpt

Food prices are expected to increase because of widespread drought conditions, U.S. Department of Agriculture (USDA) officials said recently. USDA slashed its forecasts for the production of grain and soybeans--the two commodities used in hundreds of foods and as feed for hogs, cattle, chickens and other livestock.

"It's been extremely hot and dry. The drought has had a profound impact on these crops," says Gerald A. Bange, chairman of the World Agricultural Outlook Board, a panel that reviews and approves USDA's crop forecasts.

USDA lowered its estimate for corn production by 7 percent from last year, predicting that almost 8.89 billion bushels will be harvested in 2002. It would be the lowest output since 1995. "The corn crop is clearly the saddest I've seen in years," says Bill Nelson, a commodities analyst with A.G. Edwards & Sons who recently visited farms in Nebraska and other states hit by drought.

USDA also lowered its forecast for other crops, including soybeans. USDA officials said production is expected to be 2.63 billion bushels, down 9 percent from 2001. Forecasts for wheat production were lowered by 14 percent from last year's crop to 1.69 billion bushels.

The Maryland Department of Agriculture has estimated bushels per acre will be the lowest since 1993. But those estimates are based on an Aug. 1 survey, and there has been no significant rainfall since then. "As bad as the estimates are, it's already gotten worse. It continues to deteriorate every day that we don't have rain," says spokesman Don Vandrey. "I think it's very possible it will be worse than 1993." The outlook also is poor for soybeans, tobacco and apples in the state.

Nationally, the average price of corn is expected to be about $2.50 a bushel this year, 50 cents higher than last year, Bange says. The average price of soybeans is expected to jump to about $5.60 a bushel, he says.

Ann H. Gurkin, an analyst for Davenport & Co., an independent stock brokerage in Richmond, Va., said prices are likely to increase, but it's "too hard" to say by how much. It is too soon to tell what kind of ripple effect the corn and soybean price increases might have on other kinds of foods such as meat, she says.

A spokesman for the Food Marketing Institute, an industry trade group, says prices will not increase immediately because many food manufacturers have lengthy contracts with growers, with prices locked in for six months or more. …

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