As each day that Midwestern corn and soybean fields go without rain, the magnitude of the impact on consumer’s food budgets increases, according to Purdue University’s agricultural economist Dr. Chris Hurt.  He added, however, that consumers may not realize the higher food costs until next year.  The persistent hot, dry weather has hit farm production in Indiana, the nation’s fifth-largest producer of corn, harder than any other major corn and soybean producing state, Hurt said this week at a news conference in Indianapolis. The conditions have shrunk corn and soybean production and dried up pastures where cattle feed in summertime, Hurt noted.

U.S. food prices tend to rise when production decreases in major farm states and the drought is likely to affect production in other breadbasket states too, he offered.  USDA currently projects that food prices will rise by as much as 3.5 percent starting late this year and into 2013. Everything from meat, margarine, and milk to baked goods, cereal, and salad dressing will likely cost more, Hurt said.  Beef prices could rise by as much as 10 percent through next year if ranchers lose many cattle to heat stress or sell off portions of their herds to avoid the high cost of feed, according to Hurt and his Purdue associates.  These analysts forecast that, if the drought continues through August, and it shows no sign of letting up, crop losses could be as great as they were during the 1988 drought, when corn and soybean production plummeted by about 30 percent.

Food prices increased by more than 5 percent after the drought and by nearly 6 percent in 1989, according to USDA.  Another factor is the ethanol industry which is mandated to use five billion bushels of corn to produce ethanol, Hurt said.  If corn production drops as much as expected, he said, “the issue we haven’t heard since 2008 is going to come back–food versus fuel.” That could lead to a political battle in Washington, he added.

Every day without rain causes crop conditions to deteriorate, Purdue University corn specialist Bob Nielsen said, and some damage is already irreversible. Four to six inches of precipitation over several weeks would be required to provide much relief, he said.  “These droughts are devilish things, and it’s hard to predict what’s going to break then,” Nielsen said.