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US drought woes deepen

Jul 27 2012 14:30 AFP

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Food price hikes on the horizon

 

Washington - The drought in America's breadbasket is intensifying at an unprecedented rate, experts warned on Thursday, driving concern food prices could soar if crops in the world's key producer are decimated.

The US Drought Monitor reported a nearly threefold increase in areas of extreme drought over the past week in the nine Midwestern states where three quarters of the country's corn and soybean crops are produced.

"That expansion of D3 or extreme conditions intensified quite rapidly and we went from 11.9% to 28.9% in just one week," Brian Fuchs, a climatologist and Drought Monitor author, said.

"For myself, studying drought, that's rapid. We've seen a lot of things developing with this drought that were unprecedented, especially the speed."

Almost two thirds of the continental United States are now suffering drought conditions, the largest area recorded since the Drought Monitor project started in 1999.

"If you are following the grain prices here in the US, they are reflecting the anticipated shortages with a price increase," Fuchs said.

"In turn, you're going to see those price increases trickle into the other areas that use those grain crops: cattle feed, ethanol production and then food stuffs."

In some rural areas, municipal water suppliers are talking about mandatory restrictions because they have seen such a dramatic drop in the water table that they fear being unable to fulfill deliveries to customers, Fuchs said.

"Things have really developed over the last two months and conditions have worsened just that quick and that is really unprecedented," he added.

"Definitely exports are going to suffer because there is going to be less available and the markets are already reflecting that.

"It's anticipated that this drought is going to persist through the next couple of months at least and conditions are not overly favorable to see any widespread improvement."

President Barack Obama's administration has opened up protected US land to help farmers and ranchers hit by the drought and encouraged crop insurance companies to forgo charging interest for a month.

Officials have said the drought will drive up food prices since 78% of US corn and 11% of soybean crops have been hit and the United States is the world's biggest producer of those crops.

The current drought has been compared to a 1988 crisis that cut production by 20% and cost the economy tens of billions of dollars.

The US Department of Agriculture issued retail price forecasts Wednesday for 2013 and they already showed an impact from the drought, with consumers expected to pay between three and four percent more for their groceries.

"The 2013 numbers reflect higher-than-average inflation which is partly a function of the drought and the higher crop prices," said Ephraim Leibtag of the USDA's Economic Research Service.

"The drought effects are starting now at the farm and agricultural level.

"Those things take two to 12 months to work through the system. So you'll see some effects as early as the fall (autumn) in terms of the grocery stores and restaurants, certainly later in the year and into 2013."

The full impact of the drought on food prices won't be known for months.

"It's too early to tell as we don't know how much of the crop is going to be lost and how much higher corn and soybean prices will go," Leibtag said.

"We are not forecasting major impacts on retail food at this point. If the drought gets worse or corn and soybean prices rise even more, that would start to have a bigger impact."

Even before the last week, farmers were telling AFP they may have to cut their losses - chopping down fields of half-mature, earless corn to feed the stalks to cattle.

Weather forecasters predicted no respite.

food prices  |  drought
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