Floods Mean Rising Corn Prices

[Jun 20, 2008.]

 

Middle America has experienced its most severe floods since 1993. This has reverberated in the food markets of America and the rest of the world. The inclement weather in the one of the world's biggest grain producing regions has led to a preternatural growth in the price of corn.

The Chicago Board of Trade reports corn prices of more than $8 per bushel. The problem is that up to 5 million acres of arable land are not being used to grow corn this year as a result of the massive floods.

"3 million acres of corn [are] under water and probably 2 million didn't get planted," explained the long-time grain trader Glenn Hollander. "So that gets you up to 5 million or over 700 million bushels, and that takes out the entire carry-out," he continued. The "carry-out," based on surplus for this year, is a figure that is used by grain traders to calculate next year's stocks.

In the Midwestern states of Iowa and Illinois, rivers have flooded the levees designed to contain them. This has caused thousands of farmers to abandon their homes. As the states of Iowa and Illinois grow approximately one third of America's soy and corn, this state of affairs is problematic for America's agriculture.

The National Guard has been summoned to help hold up the levees along the Mississippi River, working alongside local volunteers. President George Bush himself is due to visit the area three days from now.

As of now, America produces 54% of all corn globally. It also produces 36% of the soybeans eaten across the world, and 23% of the wheat. Thus, the climate trouble in the Midwest could result in inflated food prices throughout the world. While traders are running to invest in corn and other grains, researchers warn that the global economy is in danger.

Finance minister from eight countries around the world discussed the problem as the came together in Japan over the past few days. "Elevated commodity prices, especially of oil and food, pose a serious threat to stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressure," they told the press.