Midwest flood may cover nation in higher food prices

The flood tides enveloping the Midwest will crest across the nation in the form of higher prices in just the places where households have been hit the hardest -- food and fuel.

Floodwaters have spread across the Corn Belt, preventing farmers from planting soybeans and damaging a corn crop just starting to emerge from the ground. Analysts estimate that flooded Iowa and Illinois and the other corn states might produce 15% less of the grain than last year. Some believe the shortfall will be larger.

That pushed corn prices to near $8 a bushel Monday and sparked fears of another jump in food inflation. Already, the cost of food is increasing at its fastest pace in 18 years.

"This is a pretty big train wreck developing," said Steve Meyer of Paragon Economics in Adel, Iowa.

Corn is one of the economy's essential commodities. It feeds cattle and dairy cows, it's cooked into breakfast cereal, it sweetens soda pop and it creates ethanol. The developing shortage is expected only to increase competition for corn among farmers, food companies, ethanol refiners and exporters.

Consumers can expect "to pay more at the pump or more in the food aisle, or both," said Chat Hart, an agricultural economist at Iowa State University.

For now, cattle ranchers, pork farmers, dairies and other food producers will take the largest hit, said Michael Swanson, a Wells Fargo & Co. agricultural economist.

"We have record prices for hogs and for cattle, but these prices aren't going to be high enough for the farmers to make any money because the price of corn is so high," he said.

Barring a sudden turnaround in the corn markets, shoppers should expect to see the price of meat rise as farmers reduce the size of their herds to save money on feed.

Some economists believe that will create a dip in meat prices followed by increases. Meyer, who specializes in the economics of the U.S. livestock market, expects prices to remain steady for some months, but not decline.

He said chicken prices would start to increase first, as poultry supplies tighten. That would be followed by pork and then beef.

Hog farmers in South Dakota are starting to liquidate their herds and get out of the business, said Jeremy Lehrman, executive director of the South Dakota Pork Producers Council.

The pork industry is dependent on farmers such as Doug Boland, 53, a fourth-generation farmer who lives near Williamsburg, Iowa, about 35 miles southwest of flood-ravaged Cedar Rapids.