Remember when we were suggesting that the drought would drive up food prices?
In July, food prices jumped 6%, after three months of declines, according to the United Nations’ monthly Food Price Index released Thursday. The main drivers behind the increase? Grain prices. And more specifically, corn prices, which have hit record highs in recent weeks.
According to the U.N. report, global corn prices surged nearly 23% in July, exacerbated by “the severe deterioration of maize crop prospects in the United States, following drought conditions and excessive heat during critical stages of the crop development.” …
Food prices have been creeping up throughout the United States, as hot temperatures across the Midwestern and Western parts of the nation have dried out crops and driven up the price of corn and grain.
The U.N. index of cereal prices soared 17% last month, creeping closer to its all-time high set in April 2008.
Increased prices and reduced supply also mean that global crop stockpiles will continue a three-year decline — driven in part by increasing demand for meat, which is eroding grain supplies faster than usual.
On Tuesday, President Obama announced a plan to address the drought.
Within the last month, USDA has opened the Conservation Reserve Program to emergency haying and grazing, has lowered the borrower interest rate for emergency loans, and has called on crop insurance companies to provide more flexibility to farmers. The Department of the Interior has provided additional grazing flexibility on federal lands and the Small Business Administration is working to help with access to investment capital and credit in affected communities.
The only thing that can actually resolve the problem, of course, is rain.
On the weather front, modest amounts of rainfall in portions of the Midwest this week will provide only minimal relief from drought, an agricultural meteorologist said Thursday.