University Daily Kansan / Wednesday, June 22, 1988
Drought raising prices
Increases not as bad as feared, officials say
The Associated Press
WASHINGTON — Drought is causing an increase in consumer food prices this year but not by the great inflationary leap that some have feared, the Department of Agriculture said yesterday.
"If the drought continues, food prices will rise but the increases are likely to be moderate," a senior USDA economist reported. "The effects of such higher food prices on the overall rate of inflation would be negligible."
The report was prepared by Ewen M. Wilson, assistant secretary for Economics, who acknowledged that "much of the nation's cropland has been gripped by a searing drought which threatens to imperil this summer's crop harvest."
Although the forecast will be revised next month, a preliminary analysis shows that 1988 food prices might rise by an average of 3 percent to 5 percent, the report said. Until the drought, USDA economists predicted that the increase would be in the range of 2 percent to 4 percent, compared with a 4.1 percent gain in 1987.
Wilson added that the prospect of reduced production has driven up the
farm prices of crops and that shriveled forage supplies have forced many producers to reduce their livestock inventories.
As a result, there has been apprehension over the possibilities of food price increases and even renewed inflation, Wilson said.
"We will see some price runups in certain foods," he said. "For example, pasta products made from durum wheat and oats-based cereals, but overall food price inflation in 1988 will be held to moderate levels."
Food accounts for about 16 percent of the government's Consumer Price Index which is used to gauge changes in living costs for urban consumers.
Wilson added: "Then upward adjustment of our food price estimate will have a negligible impact on the overall rate of inflation in the United States."
Food prepared at home accounts for about 10 percent of the overall CPI, and food purchased or consumed away from home, mainly restaurant meals, accounts for 6 percent.
"Since food accounts for 16 percent of the overall CPI, a 1 percent boost in food prices translates into an increase of less than two-tenths of 1
percent in the overall CPI." Wilson said, "However, inflation is a monetary phenomenon dependent upon monetary policy. There is no reason to believe that a one-time drought-induced boost in farm commodity prices will lead to higher overall inflation. The metal markets and oil prices continue to be well behaved, and wage increases are moderate."
Wilson said higher commodity prices this year "will bring about a production response" in 1889.
According to USDA records, a rise of 3 percent to 5 percent would be the sharpest since food prices rose an average of 7.9 percent in 1981 as the nation's general inflation spiral was winding down.
More than 78 million acres of U.S. farmland have been taken from production this year under federal programs, including 24 million acres in a long-term Conservation Reserve Program.
"The immediate problem is not one of food shortages or food price inflation, except in certain specific instances, but rather the problem is one of responding in a compassionate way to the losses faced by American farmers," Wilson said.
Grain prices high Farmers may find profit in dry weather
"The few sprinkles we've had since haven't been enough to wash the dust
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The high prices reflect fears that drought will curb harvests. Still, agriculture officials said timely rains could save most of the crop.
Eric Wahl, who raises corn, soybeans and hogs at Monticello in northeast Iowa, said his farm had not had any significant rain in more than two weeks.
- Extra storage space available.
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In the meantime, despite grain prices nearly twice last year's highs, farmers are apprehensive, said Peter Brent, who coordinates a hot line for troubled farmers for the rural advocacy group Prairiefire. "Everybody's sitting tight, praying it will rain."
With corn prices going up, there will be less drain on the U.S. Treasury as federal deficiency payments to farmers shrink, Wisner said. Deficiency payments represent the difference between the government's target price for corn, $2.93 a bushel in 1988, and the market price received by farmers enrolled in the farm program.
In Iowa, which was swettering through its third straight day of triple-digit temperatures, soybean prices rose to an 11-year high at elevators yesterday, with binder rose to its highest price since September 1884, with bids of more than $3 a bushel common.
“For consumers it's almost certain to mean some increase in food costs,” he said if it is too early to say what we should do on how long the dry weather lasts.”
Apartments
The big winners of the drought would be farmers with reasonably good crops and large carryrovers from previous harvests, Wisner said.
The U.S. Treasury also could benefit if the dry spell continues over the nation's Grain Belt, but "agriculture as a total would be a net loser," Iowa State University economist Robert Wisner said.
off the corn leaves," he said.
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DES MOINES, Iowa — If winners emerge from the drought that has sent grain prices soaring, they will be farmers lucky enough to keep crops intact and those with surpluses from previous harvests, a farm economist said yesterday.
Wahl said he'd like to cash in on the rising grain prices, but wasn't sure he'd have much to harvest. He said he would need his stored corn to feed his livestock.
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Farmers who do have grain to sell also are facing tough decisions — whether to sell now or wait for even higher prices, knowing that any return to normal rainfall would wash out the price rally.
The Associated Press
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Fire starts in parched farm field
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'Everybody's sitting tight, praying it will rain.' — Peter Brent Farm hotline coordinator
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The Associated Press
BECKEMEYER, Ill. — Fields are so dry because of the drought that one farmer returning home after a day of harvesting winter wheat turned around and found the field behind him burning.
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Regis Krebs of Beckemeyer, a town of 1,100 people located 45 miles east of St. Louis, had directed his combine toward home when he noticed the fire, which apparently was caused by a spark from the combine's muffler.
"I'd just as soon forget about it," Krebs said yesterday. "Luckily, it was just a minor fire. It just burned a little corner of the field."
"He lost a couple acres of wheat in about 10 minutes." Beckemeyer fire chief Vincent Pollman said.
Pollman said there was not much farmers could do to prevent those kinds of fires when fields become parched. Dry, brittle grass and straw need little to be in drought conditions, he said.
"All it takes is a spark from a hot muffler, or for a bearing to go out and heat up." Pollman said. "As dry as it's been around here, I'm surprised we haven't had more calls this summer. We need a good rain."
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