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Fickle Weather May Hike Food Costs

The wet spring and sizzling summer across most of the Midwest have sent grain prices up about 25 percent from a year ago, and the impact could eventually find its way to the nation’s dinner tables.

Rising corn prices have made it more expensive to fatten livestock, and increased wheat prices have boosted the costs of bread, cereal and a number of other staples that are the base of many American’s diets.

But for now, consumers seem safe from higher food prices, and might not see any significant cost changes at least through the remainder of this year.

‘I don’t think they’ll (the consumer) be affected very much,” said Mike Singer, an agricultural economist at the Federal Reserve Bank of Chicago, adding that food prices remain low by historical standards. “The cost of the corn in corn flakes is relatively minor.”

The unusually cool and wet spring in the Midwest stunted the wheat crop in Kansas and delayed corn planting in Iowa and Illinois. The same region was blasted with a summer heat wave that did not let up for weeks, causing crops to wither and more than 4,000 Iowa cattle and thousands of chickens to die.

Rising export demand for U.S. crops has also pinched supplies and contributed to the price increases.

In addition, this year’s corn crop was limited by federal farm programs, which required farmers to reduce planting after the record 1994 crop.

The combination of these factors sent grain prices soaring about 25 percent from a year ago.

Wheat for September delivery closed at $4.55-1/2 a bushel Wednesday on the Chicago Board of Trade, up more than 85 cents a bushel from a year earlier. September corn closed at $2.89-1/2 a bushel, up 63 cents from a year ago.

“We have real reasons for these rises,” said Donald Roose, president of U.S. Commodities Inc., a trading company in West Des Moines, Iowa. “We’re in the tightest situation that we’ve had in corn and wheat in a long time. You have to go back to the early 1970s to get anything close to what we have now.”

But the surge in grain prices has hardly been felt by the consumer. Analysts say food processors, who last year benefited from low commodity prices, have absorbed this year’s higher costs instead of passing them on to the consumers.

“There’s a big enough gap between the producers and retailer that most of that is absorbed,” Roose said. “I don’t see a big change to the consumer right now.”

Supermarkets have yet to feel the pinch of the higher prices. Ruth Mitchell, a spokeswoman for Hy-Vee Food Stores Inc. of Des Moines, which has more than 220 grocery stores in seven Midwest states, said that they haven’t seen any impact from higher costs.

She said the biggest impact on food prices this year occurred when heavy rains swamped California farms.