Bad weather promises higher food prices--and a tougher fight on inflation

04/21/2011 1:52 pm EST


Jim Jubak

Founder and Editor,

The weather just isn’t cooperating. When the world needs bumper harvests to slow food price inflation, bad weather has lowered projected harvests in the United States.

With wheat and corn prices already near record highs and with projections for end of season stockpiles calling for record lows, weather reports from the U.S. grain belt point to below normal yields and slower than usual planting.

About 38% of the winter wheat crop is in poor or very poor condition as of April 17, according to the U.S. Department of Agriculture. That’s up from 36% poor or very poor a week earlier and from just 6% at this time in 2010.

Dry weather is slowing planting of spring wheat. Only about 5% of the spring wheat acreage was sown as of April 17. That compares to 8% at the same time in 2010 and a five-year average of 12%.

Unless weather improves, yields in the U.S. could fall to 38 or 39 bushels an acre, the lowest since 2006. Yields have been below 40 bushels an acre only twice in the last 13 years.

Not surprisingly wheat for July delivery reached a high of $8.2475 a bushel on the Chicago Board of Trade in April 18.

The national corn crop is struggling too. Farmers have fallen behind in corn planting because of bad weather with just 7% of the corn crop planted as of April 17. That’s down from 16% at this point in 2010.

Corn for July delivery climbed to $7.6125 a bushel in Chicago.

The biggest effect of all this will be on inflation, especially inflation in China, a major importer of grain. Rising wheat and corn prices will make it just that much harder for China to control food price inflation that climbed to just shy of a 12% annual rate in March.

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