Chance of U.S. drought seen; food squeeze feared
By Ayesha Rascoe - Analysis
WASHINGTON (Reuters) - The U.S. Midwest has enjoyed nearly 20 years without a major drought but forecasters worry the corn belt's luck could dry up this year, further squeezing tight global supplies amid soaring food prices.
With its last major drought in 1988, the Midwest has reached its average span of 18.6 years between droughts.
Considering that statistic and current weather conditions, Iowa State University extension climatologist Elwynn Taylor said the corn belt has a one in three chance of drought this year.
"We do have to be prepared," Taylor said. "A 33 percent chance is high, that's a risk."
The Midwest's chances of drought are exacerbated by La Nina, an unusual cooling of Pacific Ocean surface temperatures that can trigger widespread changes in global weather patterns. If La Nina has not dissipated by July, Taylor saw a 70 percent chance for U.S. corn yields below the 30-year trend of 150.6 bushels per acre.
"We don't have any reason to think La Nina causes drought, but it certainly does aggravate it," Taylor said.
Drought is not a foregone conclusion for the Midwest, where excessive wetness has held up spring corn plantings. Crops may benefit from that extra soil moisture during a dry summer, said Brad Rippey, a U.S. Department of Agriculture meteorologist.
"It's way too soon to have any great alarm," Rippey said.
But crops planted during wet springs can develop shallow roots, making them more susceptible to a summer drought, warned National Oceanic and Atmospheric Administration drought specialist Doug Lecomte.
Lecomte said he saw a slightly heightened risk of drought, largely because there is tendency for dryness and warmth in western corn belt during and after La Nina.
LIVESTOCK AT RISK
If a drought brought on a major crop failure in the United States, the world's breadbasket, it would wreak havoc on global food prices, already at record levels.
A drought could push the price of corn to $8 to $10 a bushel, said Ron Plain, a professor of agricultural economics at the University of Missouri. May corn on the Chicago board of trade was at $5.82-1/4 a bushel at midday on Friday.
"Immediately, there would not be a whole lot of impact on the U.S.," Plain said. "The way we'd be impacted would be through meat, milk, and egg prices."
A spike in corn prices would hit U.S. livestock producers especially hard since they use corn to feed their animals.
"Pork producers, they're not weathering this current storm of high prices for corn that well," said Stewart Ramsey, a senior economist at Global Insight.
Unless they received extensive aid, Ramsey said a severe drought "would clean house" in the hog industry, leaving only the strongest pork producers in business.
Poultry and cattle producers also would suffer, and eventually American consumers would face a surge in prices at the supermarket.
WORLD GRAIN STOCKS LOW
As a wealthy country, the United States could weather higher food prices and declining supplies. But as the world's largest exporter of corn, America's recovery may come at the expense of the rest of the world.
The United States exported 2.13 billion bushels of corn in 2007, but a drought would force America to purchase corn back from the international market, leaving other countries scrambling for food staples.
"We would buy food out of the mouths of the rest of the world," Ramsey said.
World grain stocks already are at historically low levels. Further shortages would intensify competition between importing countries for available grain supplies, said Lester Brown, president of the Earth Policy Institute
Governments would probably have to ration food, said Brown, warning that levels of world hunger would rise.
"There are hundreds of millions of people in the world who are on the lower rungs of the global economic ladder and even with the current price increases a lot of them are losing their grip and starting to fall off," he said.
In the event of a crop failure, the U.S. government would need to ease cost pressures from livestock producers by offering feed assistance programs or providing loans.
The government would also have to roll back its corn-based ethanol usage mandate, which requires the use of 9 billion gallons of ethanol in motor gasoline in 2008.
"If the government would move quickly to change ethanol policy, it would go a long way towards reducing the negative effects of drought," Plain said, noting ethanol is the biggest growth factor in usage of corn.
(Editing by Russell Blinch and David Gregorio)