More Impact to Food Supplies

The Wall Street Journal outlines how the weather this spring is likely to impact food inflation here:

The heavy rains and flooding will have national, and even global, consequences through rising food prices. The rains have further delayed planting for this year’s corn crop, with perhaps as many as three million acres lost for the year. Some farmers may be able to plant soybeans instead, if the rains let up, but others may simply file for federal crop insurance for lost acreage.

The price of corn futures climbed well past $7 a bushel last week, to new records. Higher corn prices will in turn pass through the entire food chain to meat and dairy products and anything that relies on feed grain. There’s little that can be done about freakish weather, but that’s all the more reason for policy makers not to create artificially high prices with bad policy.

Corn prices would inevitably spike amid this supply shock, but that spike is far higher this time because prices are already higher than they should be due to ethanol subsidies and especially the Federal Reserve’s inflationary monetary policy. Corn was only $4 a bushel as recently as last August, but by April had hit $6. You can’t blame that on the weather.