Throughout April and May, U.S. farmers faced floods, tornadoes, downpours and droughts — all of which made planting difficult. Now in June, intense heat has been sweeping over much of the country.
The harsh weather likely will reduce the fall's harvest, according to a new report from the U.S. Department of Agriculture. That, in turn, could further drive up grocery prices for consumers.
"Farmers had everything thrown at them" by Mother Nature this spring, USDA economist Gerald Bange said. "Excessive rains led to planting delays, and then some of what was already planted actually got flooded."
The violent storms and persistent rains were especially challenging for Midwestern farmers who needed to get their corn crops planted by mid-May to maximize the harvest, Bange said.
The USDA has reduced its June estimate of planted corn acres by 1.5 million acres, down from its March "planting intentions" survey to 90.7 million acres. That means U.S. farmers are on track to produce 13.2 billion bushels this year, down 305 million bushels from the May estimate.
Bange said the harvest should be a record, but still will be too small to meet the record demand. "We are seeing very, very strong demand for corn for bio-energy, livestock feed input and export," he said.
Prices have been shooting up along with the surging demand. The cash price of a bushel is now at $7.75, up from $3.20 at this time last year. Some analysts expect the price to keep climbing to $9.
All of that could have a big — and bad — impact on consumers. Economists are predicting meat prices will rise 7 percent this year. And that would hurt consumers, who already have seen the average price per pound of beef rise 8 percent over the past year, according to data compiled by the National Cattlemen's Beef Association.
The problem of rising prices is not confined to corn-fed beef. In fact, most food prices are trending up. This past week, the American Farm Bureau Federation released its spring Market Basket survey of 16 common food items purchased at supermarkets. It found that on average, prices were 8 percent higher than one year ago.
A number of food companies, including Kraft, Kellogg, Sara Lee and Smucker, have raised prices to keep up with the surge in the cost of ingredients like corn, oats, coffee and so on. Many restaurants, including McDonald's, also have raised prices.
But Bange noted that food price increases reflect much more than just the Midwestern flooding and the Southwestern drought. The trend toward higher prices has been in place for months — and is a global phenomenon.
A United Nations report issued last week showed that global food prices have been unusually high this year. The U.N.'s global price index for meat hit a record high in May. The U.N. blamed bad weather, high oil prices, the earthquake and tsunami in Japan, and export policies that restrict the flow of food.
But the single biggest factor is soaring demand for food as the world gets more crowded. Inventories of food stocks of all sorts are quite low all over the world, according to Ben Grossman-Cohen, a spokesman for Oxfam America, an international relief and development organization.
The tight inventories keep prices high, making it hard for poor people to eat. "About a billion people go hungry every day because they can't afford to grow or buy enough food," he said.
On June 22-23, the agriculture ministers of the so-called G-20 — a group of the world's biggest countries — will meet in Paris to discuss food issues. They are planning to launch an initiative called the "Agriculture Market Information System." This system would push countries to more honestly report on agriculture. For example, China has always been secretive about its stocks of food. So if China signs on, it would start to release more data about its food inventories and consumption.
The agriculture ministers say transparency is important. If countries had a clearer idea of what crops were being planted and how they were coming along, then officials could respond more quickly in a coordinated way whenever they see food shortages developing. More crop information also would cut down on price speculation.
JACKI LYDEN: Throughout the spring, U.S. farmers faced floods, tornados, downpours and droughts - everything but locusts. All of that bad weather made planting difficult. Now in June, intense heat has been sweeping over much of the country. The wild weather has been helping drive up food prices. This past week, the U.S. Department of Agriculture said the delay in spring planting could reduce the size of the fall corn harvest.
Here to talk about the anxiety growing from farm to table is NPR's senior business editor Marilyn Geewax. Welcome, Marilyn.
MARILYN GEEWAX: Hi, Jackie.
LYDEN: So what is the USDA saying about this year's corn crop?
GEEWAX: Agriculture officials started the year being pretty optimistic about how much corn American farmers would be able to produce this year. But then so much of the country got hit with that horrible weather in April and May. You remember those violent storms. We persistent rains. It was especially bad for Midwestern farmers because, you know, they really need to get their crop into the ground by mid-May.
Of course, the weather could turn around. It's weather, it could be perfect going forward and that would help turn around these prices. But right now, most people are betting that corn supplies will end up being really tight this year. And that would be very discouraging news because, you know, we've already seen corn prices shoot up so much. The cash price of a bushel is around $7.75 right now. And it was $3.30 last year. So analysts are worried. They think the prices could go as high as even $9 a bushel.
LYDEN: That's a huge jump and even more consumer pressure. Where exactly will consumers see the rise?
GEEWAX: Well, think about it this way. The farmers have to purchase corn to feed to their livestock. And if they have to pay more for that feed, then consumers are going to have to pay more for their meat. Economists are predicting that meat prices are going to up about seven percent this year. And we've already seen the average price per pound of beef rise about eight percent from last year.
Of course, it isn't just the meat that's going up. A few days ago, the American Farm Bureau Federation released its spring Market Basket Survey. It looks at 16 common food items that are purchased at supermarkets. It found that on average, the prices were eight percent higher than one year ago.
So a lot of food companies - Kraft, Kellogg, Sara Lee, Smucker - they've all been raising prices to keep up with this surge in the price of their ingredients - the corn, the oats, the coffee and so on. And we're starting to see it at restaurants, too, even McDonald's has raised its prices.
LYDEN: With prices already being higher, Marilyn, this is obviously more than just this spring's horrible weather, bad as it was and devastating as it's been.
GEEWAX: Yes, that's right. The trend towards higher prices, that's been in place for months now, and of course it's a global phenomenon. The United Nations had a report out last week that showed that global food prices have been unusually high this year. The U.N.'s Global Price Index for meat actually hit a record high in May. The U.N. is blaming bad weather but lots of other factors, too - high oil prices, the catastrophe in Japan, export policies.
But really, the biggest factor is this soaring demand. The world is just getting more crowded and supplies aren't keeping up with the pace.
LYDEN: You know, Marilyn, being from an agricultural area - at least it was when I was growing up - you always wonder what can be done besides hoping for rain or hoping rain stops.
GEEWAX: Well, later this month, there will be a gathering of the agriculture ministers of the so-called G20. That's a group of the world's largest countries, and it includes the United States. So Agriculture Secretary Tom Vilsack, he'll be there. And these top officials are getting together because they're so worried about rising prices and these lean inventories.
They want to launch an initiative called the Agriculture Market Information System. This system would push countries to more honestly report about what's happening with their farmers. For example, China has always tended to be secretive about its food stocks. So if China were to sign on, it would release more data about its food inventories and its consumption.
LYDEN: And what exactly would that sort of transparency do?
GEEWAX: The Ag ministers say that transparency is important. If everyone had a better idea of what crops were being planted and how they were coming along, then the officials really could respond more quickly in a coordinated way whenever they see food shortages developing. And more crop information of course would help cut down on some of that price speculation.
LYDEN: Well, Marilyn, what an interesting report. Thanks so much for coming in and sharing that with us.
GEEWAX: Oh, you're welcome. It was fun to be here, Jacki. Transcript provided by NPR, Copyright NPR.