Floods seen adding to already high food prices

By Bob Burgdorfer

CHICAGO (Reuters) - The cost of everything from corn chips to beef steaks was going higher even before the disastrous floods hit millions of corn and soybean acres in the U.S. Midwest, and now food price increases may be even greater, industry sources said on Tuesday.

Torrential rains over the past week and the worst floods in 15 years have badly hit the U.S. Midwest, which directly or indirectly produces much of the nation's food.

The corn and soybeans grown there are used in processed foods and are fed in some form to the cattle, hogs, and chickens that produce the nation's meat.

"Given that grain supplies are already tight, this flood comes at a bad time and is going to push the major grain crop prices up rapidly. Over a longer time, that will have an effect on supermarket prices as well," said Parke Wilde, economist at Tufts University.

The price of corn jumped 22 percent this month as fears over the damage to crops by the incessant rain grew, and is up about 90 percent from a year ago at record highs.

Meat prices are expected to go higher as producers reduce herds or flocks in reaction to higher feed prices. Cattle futures in Chicago already set a record on Tuesday as the April 2009 contract hit 116.875 cents per lb, the highest price ever.

Prior to the flooding, the U.S. Agriculture Department predicted food prices would be up 5 percent this year.

Experts say it is too early to estimate to what degree the flood will impact food prices. Worries mounted on Tuesday after a levee protecting farmland in Illinois near the swollen Mississippi River broke, adding to the damage.