GO
Loading...

Food Prices Unlikely to Come Down After Harvests

In a year when global harvests need to be excellent to ease the threat of pervasive food shortages, evidence is mounting that they will be average at best.

Some farmers are starting to fear disaster.

American corn and soybean farmers are suffering from too much rain, while Australian wheat farmers have been plagued by drought. "The planting has gotten off to a poor start," said Bill Nelson, a Wachovia grains analyst. "The anxiety level is increasing."

AP

Randy Kron, whose family has been farming in the southwestern corner of Indiana for 135 years, should have corn more than a foot tall by now. But all spring it has seemed as if there were a faucet in the sky. The rain is regular, remorseless.

Some of Mr. Kron's fields are too soggy to plant. Some of the corn he managed to get in has drowned, forcing him to replant. The seeds that survived are barely two inches high.

At a moment when the country's corn should be flourishing, one plant in 10 has not even emerged from the ground, the Agriculture Department said Monday. Because corn planted late is more sensitive to heat damage in high summer, every day's delay practically guarantees a lower yield at harvest.

"This is pushing my nerves to the limit," Mr. Kron said one recent morning, the sky as dark as the unplanted earth.

Last winter, as the full scope of the global food crisis became clear, commodity prices doubled or tripled, provoking grumbling in America, riots in two dozen countries and the specter of greatly increased malnutrition.

As the world clamors for more corn, wheat, soybeans and rice, farmers are trying to meet the challenge. Millions of acres are coming back into production in Europe. In Asia, planting two or three crops in a single year is becoming more common. American farmers are planting 324 million acres this year, up 4 million acres from 2007.

Too much of the best land is waterlogged, however. Indiana and Illinois have been the worst hit, although Iowa, Wisconsin and Minnesota were inundated last weekend.

Bob Biehl, whose farm is near St. Louis, has managed to plant only 140 of the 650 acres he wanted to devote to corn. Some farmers in his area "haven't even been able to take the tractor out of the shed," he said.

United States soybean plantings are running 16 percent behind last year. Rice is tardy in Arkansas, which produces nearly half the country's crop.

"We're certainly not going to have as good a crop as we had hoped," said Harvey Howington of the Arkansas Rice Growers Association. "I don't think this is good news for anybody." Harvests ebb and flow, of course.

But with supplies of most of the key commodities at their lowest levels in decades, there is little room for error this year.

American farmers are among the world's top producers, supplying 60 percent of the corn that moves across international borders in a typical year, as well as a third of the soybeans, a quarter of the wheat and a tenth of the rice.

"If we have bad crops, it's going to be a wild ride," said the Agriculture Department's chief economist, Joseph Glauber."There's just no cushion." As every farmer knows, trouble can come at any point before the harvest is complete.

Danny and Karen Smith get up in the middle of the night at their wheat farm in Milton, Kan., whenever they hear thunder. In a few weeks, the wheat they planted last fall will be ripe. A bad storm or, worse, a tornado could destroy it.

Last year, the Smiths lost nearly all their wheat to a late freeze compounded by too much rain. This year, the weather has been perfect: cool and moist. "See how plump these berries are?" Mr. Smith said, standing in the middle of one of his fields. "This will feed a lot of people."

The world wheat harvest is forecast to rise more than 8 percent this year, because of better weather and more acreage under cultivation.

But even this bright spot is tentative.

Australia was expected to emerge from a two-year drought, but that prediction is looking somewhat doubtful. With the exception of southwestern Australia and a small corner of southeastern Australia, little rain has fallen in recent months.

Many wheat farmers have been unable to plant at all, said Bob Iffla, the chairman of the country's Wheat Growers Association. As a result, the harvest is likely to be below average: 5 million to 15 million tons of wheat available for export, compared with 17 million or 18 million tons in an average year.

China also faces trouble: the agriculture ministry issued an urgent notice to wheat and rice farmers in southern China on Sunday, telling them to harvest as much of their crop as possible immediately in the face of unseasonable torrential rains expected to rake the region for the next 10 days.

In the American corn belt, the issue has also been getting the rain to stop. After heavy rains and flooding last weekend, the price of corn on the commodity markets rose Monday to a record $6.57 a bushel.

"We can't snap our fingers and make high yields," said Emerson D. Nafziger, a professor of agronomic extension at the University of Illinois. "We still depend on the weather."

A universal saying among farmers is that high prices never last, because they encourage production that fills the demand and drives down the prices. The current crisis is testing that theory.

With costs soaring for fertilizer and diesel, the expenses of farming are so high that the urge to plant more is battling, in some places, with the temptation to plant nothing.

Prajoub Suksapsri in Ayutthaya, Thailand, is among the farmers going all-out this year. For the first time in two decades of farming, Mr. Prajoub is preparing to plant a second crop of rice on his land, which usually does not have irrigation.

He and his neighbors have risked their savings to set up a system to pump water into their fields. If rice prices stay high, Mr. Prajoub could make the biggest profit he has seen in years from his two-acre farm. But if prices fall, he could face heavy losses.

"Sometimes I lie awake at night, worrying about it," he said, watching his new Honda generator chug steadily, running the pumps. The landlord for the fields that he rents is charging him more than triple the usual amount just for the right to plant an extra harvest. "He is sucking my blood," Mr. Prajoub said.

Helen Gabriel's farm in south-central Luzon Island in the Philippines also measures two acres and lacks irrigation. Faced with soaring costs for diesel, fertilizer, rice seed and insecticide, she has made a different decision from Mr. Prajoub.

"We will have no crop this year," Mrs. Gabriel said as she waited in a three-hour line for the right to buy 4.4 pounds of government-subsidized rice.

World stockpiles of rice are likely to shrink slightly this year, excluding Chinese food security reserves that are not available for world trade, after already dwindling markedly in six of the last eight years, said Concepcion Calpe, a Food and Agriculture Organization rice specialist in Rome.

That estimate does not take into account the turmoil in Arkansas. Last year, the rice crop in Arkansas yielded a record 160 bushels an acre. This year, experts there say, 150 bushels will be an achievement.

"There's no doubt about it, we're not going to have the rice to export," said Carl Frein of Farmers Marketing Service in Brinkley, Ark. "Poor countries like Haiti, I don't know what they're going to do."

For all the apprehension this year, the growing season is still young, with plenty of time for the situation to improve — or for crops to fail. "I've seen mediocre starts get a bit better, and mediocre starts get a whole lot worse," said Mr. Nelson, the grains analyst.

Mr. Kron, the Indiana farmer, gave up on corn last week after managing to plant — and in some cases replant — only about half of his 1,200 acres. Last year, his corn yielded 150 bushels an acre. This year, he will be happy to get 130 bushels.

He has warned his processor, Azteca Milling, which makes flour for tortillas and chips, that he will be short. Mr. Kron's prospects are deteriorating.

He was hoping to plant soybeans on some of his unused corn ground, but hundreds of those acres adjoin the swollen Wabash River. On Monday, the fields started flooding. "I don't know if this is the worst year we've ever had, but it's moving up the list pretty quick," the farmer said.

Featured

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video