As Flood Waters Rise Food Prices Will Follow, Analysts Say

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As Flood Waters Rise Food Prices Will Follow, Analysts Say

NEW YORK -- The floods currently ravaging the Midwest are not only causing torment and strife for impacted residents, but rippling effects will spike prices at nation supermarkets and restaurants. Analysts predict prices for meat bread, eggs and breakfast cereals will climb.

"The U.S. consumer has gotten used to cheap, affordable food," Fiona Boal, a food-industry analyst at the U.S. arm of Dutch financial firm Rabobank Group, told The Wall Street Journal. "Now the goal posts are moving."

The increase food prices are directly correlated to the heavy rains that have washed out millions of acres of prime farmland at a time when soaring demand is draining U.S. grain supplies to low levels.

Boal told the paper she expects U.S. food prices to climb between 7 and 9 percent this year, and to continue rising in 2009. The government's Consumer Price Index for all food rose 4 percent in 2007, after increasing at a 2.4 percent annual rate during the two years before that, the paper reported.

"The consumer hasn't felt it yet on the protein side. But it is coming," Richard Bond, chief executive and president of Tyson Foods Inc., the Springdale, Ark., meat producer, told the paper. According to his calculations, retail chicken prices will have to jump by double-digit percentages in 2009 for poultry processors to recoup their feeding costs at current grain prices.

While the growing season is young, the flooding is prompting some grain-industry analysts to shave their corn harvest forecasts by about 6 percent from just last week, when the Agriculture Department predicted U.S. farmers will harvest 11.7 billion bushels, reported the paper.

Dan Basse, president of AgResource Co., a Chicago commodity-forecasting concern, told the Wall Street Journal that roughly 800,000 corn acres were badly flooded and an additional 1.2 million acres can't be planted in time to produce a crop.

While the reduction seems small considering corn farmers still have about 84 million acres in production, the adjustment means there is even less corn to go around. Earlier in the year, analysts predicted demand for 13.2 billion bushels of corn, in part because federal incentives are encouraging the rapid growth of the corn-to-ethanol fuel industry.