Image: Midwest floods
Charlie Nye  /  AP
Flood waters from the Wabash River surround this farm in southwest Indiana.
msnbc.com news services
updated 6/13/2008 9:42:37 PM ET 2008-06-14T01:42:37

Flooding in the Midwest has damaged thousands of acres of cropland at a time when corn prices are already at record highs and Americans are stretching their grocery budgets.

Storms this week have inundated fields in Indiana, Illinois, Iowa, Wisconsin and other states where much of the world’s food is grown. The flooding also threatens livestock owners, who depend on the grain to feed their herds, and has forced the closures of five ethanol plants.

The flooding comes after a wet, damp spring that brought planting delays — which often translate into lower yields — and has pushed corn prices to a record near $8 per bushel, nearly double last year’s price.

"Until the weather straightens itself out, you're going to see this higher price for corn and higher food prices for that matter," said Christian Mayer, an analyst for Northstar Commodity in Minneapolis, Minn.

The recent wave of flooding prompted the U.S. Department of Agriculture this week to lower the nation's corn production estimate to about 11.7 billion bushels — or 10 percent less than last fall's crop.

A tighter corn crop also means higher prices for the corn-based feeds used to fatten up cattle, hogs and chickens.

Higher feed prices will eventually drive up meat prices because many livestock farmers are likely to slaughter some of their livestock, reducing meat supplies, said Darrel Good, a professor of agricultural economics at the University of Illinois.

"Rather than holding back some animals to expand the herd, they'll just send them to slaughter. Nobody wants to panic, but everybody's concerned," said Good, who adds that it's too soon to know what the impact on retail prices might be.

Lawmakers on Thursday agreed to create a special committee to examine the economic impact of this spring's flooding on Iowa's livestock industry.

The Legislative Council, a bipartisan group that runs the Legislature between sessions, approved a 10-member committee to study the matter. The panel initially plans two days of meetings, but lawmakers said that would be only the first step in their efforts.

"Nobody can predict what's going to happen, but we need to get some of the best minds in the state together," said Rep. Sandy Greiner, R-Iowa, a farmer from Keota. "We're just on the brink of an incredibly serious problem."

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At least initially, livestock farmers' biggest problem appears to be soaring commodity prices as corn and other grains wither in water-logged fields. Livestock and poultry producers rely on the grains for their feed, so any increase in costs could be passed along to consumers.

Record corn prices already have forced five small to mid-sized U.S. ethanol plants to shut and output of the biofuel could be slowed for months, a Citi research note said on Friday.

As much as 2 billion to 5 billion gallons of ethanol “could go offline in the next few months due to high corn prices,” the note said. The United States has an ethanol production capacity of about 8.8 billion gallons per year from 154 distilleries.

“Corn prices have witnessed a structural shift, and are now confronted with near-term supply concerns associated with flooding in the Corn Belt,” said Ron Oster, an analyst at Broadpoint Capital in St. Louis.

The Citi report did not say which companies had shut plants.

Farmers who have lost corn to flooding must now face a difficult choice: leave their fields idle and collect insurance payments or try their luck at growing soybeans, which have a later growing cycle but which also are vulnerable to overly wet soil. Farmers rarely plant corn past mid-June because crops would pollinate during the hottest time of the year, hurting yields.

In Iowa — the nation's top producer of both corn and soybeans — about 14 percent of that state's soybean crop has still not been planted, said Palle Pedersen, a soybean agronomist at Iowa State University. About 10 percent of the soybean crop there has already been destroyed by flooding.

"It's close to a disaster area," he said. "We know we're not going to get an average yield, that's for sure, but how low we'll go we don't know that yet."

Although it's getting late in the planting season, Pedersen said some farmers will still be planting corn — shorter, fast-maturing hybrids — over the next two weeks if fields dry out because they've already applied costly corn-specific fertilizers and herbicides to those fields.

He said the wet conditions will bring a heightened risk of insects and disease, which could cut yields further.

The heavy rains and flooding that are making life tough for grain farmers have also frustrated vegetable growers such as Richard de Wilde, who owns a 120-acre organic farm, Harmony Valley Farm, in southwestern Wisconsin.

Last weekend, about a foot of rain fell on his farm in Viroqua, Wis., flooding about 20 acres of vegetables ranging from tomatoes to parsnips. Some fields weren't just flooded, but were covered by gravel and silt washed out of surrounding woodlands.

"We lost a nice big field of tomatoes unfortunately, and peppers and sweet potatoes. We lost a field of beets and four weeks' worth of plantings of cilantro, spinach and salad greens," de Wilde said.

The Associated Press and Reuters contributed to this report.

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