US faces worst drought in 25 years; may push food prices

The United States is facing 'worst drought' in 25 years which could fuel food price inflation in the country, a top Obama Administration official said in Washington.

As many as 61 per cent of the land mass of the United States is currently being characterised as being impacted by this drought, the Agriculture Secretary, Tom Vilsack, told reporters on Wednesday at a White House news conference, noting that this drought is having an impact in crops.

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"78 per cent of the corn crop is now in an area designated as drought impacted; 77 per cent of the soybeans that are being grown in this country also impacted.

"It also obviously involves other commodities as well -- 38 per cent of our corn crop as of today is rated poor to very po#8744 30 per cent of our soybeans poor to very poor," he said, adding that there are indication of reduced yields this year.

"This will result in significant increases in prices. For corn, we've seen a 38 per cent increase since June 1st, and the price of a bushel of corn is now at $7.88.

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"A bushel of beans have risen 24 per cent," he said.

To help farmers, the federal government has decided to open up areas under the Conservation Reserve Program for emergency haying and grazing, he added.

"Because livestock producers will begin the process of potentially reducing their herds in light of higher feed costs, we would anticipate in the short term actually food prices for beef, poultry, pork may go down a bit, but over time they will rise.

"We will probably see those higher prices later this year, first part of next year. Processed foods obviously impacted by crop yields, and we will likely see the increase of that also in 2013," Vilsack said.

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As a result of the drought, the Agriculture Secretary said he expects a decline in US agriculture exports.            

"On exports, we would anticipate and expect they would be reduced. But again, the area and the amount of reduction depends on what the yields are, and I won't know what those are until we, in fact, harvest the crop," he said.

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Responding to a question, Vilsack said that it's conceivable in the short term that as herds are liquidated, it could provide opportunities with lower costs for the US to be even more competitive than they already are in that export market.

"Frankly we are looking at record exports, notwithstanding the difficulties we're facing here. We had a record year last year; we're looking at a strong year this year," he said.