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Drought Will Raise Food Prices in What Could Be an Endless Cycle

The drought conditions in the Midwest show no sign of letting up, and if you believe the overwhelming amount of evidence on climate change, amounts to something approaching a new normal. So the first thing I’d say about this projection of food prices as a result of the drought is that, in a constantly warming world, this can only get worse:

Scorching heat and the worst drought in nearly a half-century are threatening to send food prices up, spooking consumers and leading to worries about global food costs.

On Wednesday, the government said it expected the record-breaking weather to drive up the price for groceries next year, including milk, beef, chicken and pork. The drought is now affecting 88 percent of the corn crop, a staple of processed foods and animal feed as well as the nation’s leading farm export.

The government’s forecast, based on a consumer price index for food, estimated that prices would rise 4 to 5 percent for beef next year with slightly lower increases for pork, eggs and dairy products.

And when the 2013 forecasts come in hot as well, prices will continue to rise if that leads to lower yields. And so on. Combine that with the fact that the population is increasing at the rate where we actually need to double global food output over the next several decades to meet demand, and you have a total disaster in the making, where it will become cost-prohibitive for the planet to feed itself.

This is why we can expect the drought in the near-term and the long-term to cause global unrest, just like it did in 2007 and 2010, the last times we saw a rapid price spike. The article adds in the prospect of rampant speculation in commodities, which we’ve seen in past crises, exacerbating the problem.

In the near term, all the price instability and drought conditions are wreaking havoc with farmers, many of whom need emergency relief. But the House has held up a farm bill that passed through the Agriculture Committee. This is the latest plan on the Republican side:

The focus now is on a one-year extension of the current subsidies together with immediate disaster aid for livestock and specialty crop producers impacted by the severe weather. But the cost and practicality of this approach are in serious question, and Lucas can’t count on the support of his ranking Democrat and strong partner on the farm bill, Rep. Collin Peterson of Minnesota.

“I think of an extension as the worst idea that I have heard. And I will oppose it,” Peterson said. “I don’t see it gets us any place other than get them out of this corner that they’ve painted themselves into. That’s what this is about.”

Lucas, who was taking the temperature of his Republican committee members late Wednesday, is more open to an extension and expects to have Peterson’s backing on at least shoring up disaster aid for those producers without crop insurance.

“The feeling of leadership is a one year extension provides certainty to folks out on the farms,” Lucas said. “All the pieces are in play. I think this is an acknowledgement of what Mother Nature is doing out in the countryside but the challenge is many fold. I’m very fond of passing farm policy in a bipartisan way, not straight down a party line vote.”

Republicans are holding back the farm bill because they don’t want the headlines of major cuts to food stamps in an election year. It seems to me that the solution to that is to not cut food stamps, and pass a farm bill that is needed for the security of farmers suffering through the worst drought in a generation.

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David Dayen

David Dayen