Midwest drought worsens, food inflation to rise

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Scattered rain brought some relief to parts of the baking U.S. Midwest on Wednesday, but most of the region remained in the grips of the worst drought in half a century as the outlook for world food supplies and prices worsened.

The U.S. Agriculture Department forecast that food prices would now out-pace other consumer costs through 2013 as drought destroys crops and erodes supplies.

"The drought is really going to hit food prices next year," said USDA economist Richard Volpe, adding that pressure on food prices would start building later this year.

"It's already affecting corn and soybean prices, but then it has to work its way all the way through the system into feed prices and then animal prices, then wholesale prices and then finally, retail prices," Volpe said in an interview.

The USDA now sees food prices rising between 2.5 percent and 3.5 percent in 2012 and another 3-4 percent in 2013.

Food prices will rise more rapidly than overall U.S. inflation, the USDA said, a turnabout from the usual pattern. U.S. inflation is estimated at 2 percent this year and 1.9 percent in 2013. Food inflation was 3.7 percent last year but only 0.8 percent in 2010.

On Wednesday, the USDA added another 76 counties to its list of areas designated for disaster aid, bringing the total to 1,369 counties in 31 states across the country. Two-thirds of the United States is now in mild or extreme drought, the agency said.

Forecasters said that after weeks of hot, dry weather the northern Corn Belt from eastern Nebraska through northern Illinois was likely to see a second day of scattered rain. But in the southern Midwest, including Missouri and most of Illinois, Indiana and Ohio, more hot, dry weather was likely.

"Most of these areas need an excess of 10 inches of rain to break the drought," said Jim Keeney, a National Weather Service meteorologist, referring to Kansas through Ohio. "This front is not expected to bring much more than a 1/2 to 1 inch in any particular area. It's not a drought buster by any means."

The central and southern Midwest saw more temperatures above 100 degrees Fahrenheit on Wednesday, with St Louis at 101 F.

"There's no change in the drought pattern, just thunderstorms shifting around," said Andy Karst, a meteorologist for World Weather Inc. "There are no soaking rains seen through August 8."

The outlook sent Chicago Board of Trade grain markets higher after prices had come down from last week's record highs.

Chicago Board of Trade corn for September delivery closed 4-1/2 cents higher at $7.94-1/2 a bushel, compared to the record high of $8.28-3/4 set last week. August soybeans ended 45 cents higher at $16.94-1/4, compared to last week's record of $17.77-3/4. September wheat rose 24-1/2 cents at $9.03-1/4, compared to last week's 4-year high at $9.47-1/4.

The prices have markets around the world concerned that local food costs will soar because imports will be expensive, food aid for countries from China to Egypt will not be available, and food riots could occur as in the past.

The United States is the world's largest exporter of corn, soybeans and wheat.

Major losses in the massive U.S. corn crop, which is used for dozens of products from ethanol fuels to livestock feed, have been reported by field tours this week.

Soybeans, planted later than corn, are struggling to set pods, but if rain that has been forecast falls, soybeans may be saved from the worst effects of the drought.

A Reuters poll on Tuesday showed that U.S. corn yields could fall to a 10-year low, and the harvest could end up being the lowest in six years. Extensive damage has already been reflected in declining weekly crop reports from Corn Belt states.

"Monday's crop ratings showed losses on par with the damage seen during the 1988 drought if these conditions persist," said Bryce Knorr, senior editor for Farm Futures Magazine. "Weather so far has taken almost 4 billion bushels off the corn crop, so a lot of demand must still be rationed."

In Putnam County, Indiana, this week, crop scouts did not even stop to inspect corn fields since a glance convinced them that farmers would plow crops under rather than trying to harvest anything.

On Wednesday, scouts in central Illinois reported that some corn fields were better than expected, having benefited from early planting and pollination after a warm winter and spring.

Tom Womack of the Tennessee Department of Agriculture said some recent rains had helped soybean prospects, but "the damage that has been done to the corn has been done. No amount of rainfall will help us recover what we lost in the corn crop."

Ohio Governor John Kasich signed an order on Wednesday that will allow farmers to cut hay for their livestock from grass growing along highways adjacent to their properties.

Fire threats were growing in portions of the Plains. On Wednesday, firefighters from three north-central Nebraska counties and the National Guard battled expanding wildfires that have consumed more than 60,000 acres in the last week.

On Wednesday, helicopters dumped water on wildfires, ignited by lightning, that have been burning since the weekend in the Niobrara River Valley.

"We are making progress, but continued support is needed," Nebraska Governor Dave Heineman said.

In Missouri, one of the nation's driest states, the highway patrol said smoke from grass and brush fires was creating "very dangerous driving conditions." Discarded cigarettes were cited as a factor in those fires.

Across the Midwest, cities and towns restricted water use for gardens and lawns and tried to save stressed trees with drip bags. Reservoir and river levels were low and being carefully watched, and restrictions were placed on barge movements along the Mississippi River and recreational boating.

SHAPE OF THINGS TO COME?

The U.S. drought has been blamed on the El Nino phenomenon in the western Pacific Ocean, a warming of sea temperatures that affects global atmosphere and can prevent moisture from the Gulf of Mexico from reaching the U.S. Midwest breadbasket.

Some scientists have warned that this year's U.S. drought, already deemed the worst since 1956, is tied to climate factors that could have even worse effects in coming years.

Dangerously hot summer days have become more common across the Midwest in the last 60 years, and the region will face more potentially deadly weather as the climate warms, according to a report issued by the Union of Concerned Scientists (USC) on Wednesday.

The report looked at weather trends in Chicago, Cincinnati, Detroit, Minneapolis and St. Louis and smaller cities such as Peoria, Illinois, and Toledo, Ohio.

The report found that the number of hot, humid days has increased, on average, across the Midwest since the 1940s and 1950s, while hot, dry days have become hotter.

Finding relief from the heat has become more difficult, as all the cities studied now have fewer cool, dry days in the summer and night-time temperatures have risen.

"Night-time is typically when people get relief, especially those who don't have air conditioning," said Steve Frenkel, UCS's Midwest office director. "The risks of heat-related illness and death increase with high nighttime temperatures."

In Chicago, more than 700 deaths were attributed to a heat wave in July 1995. With more extreme summer heat, annual deaths in Chicago are projected to rise from 143 from 2020-2029 to 300 between 2090-2099, the report said.

(Additional reporting by Christine Stebbins, Kevin Murphy, Michael Hirtzer, Tim Ghianni and Sam Nelson)



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