Flooding likely to contribute to high food prices

The Financial Times this morning described the impact of the flooding in Iowa and nearby states:

Agriculture officials and traders said the damage could push up worldwide corn and soyabean prices, which have spiralled in recent days as floods have swamped crops in parts of Iowa, the US's biggest cornproducing state. The warning comes at a time when high food prices are already sparking protests across the developing world.

Corn futures in Chicago this week rose to record highs of more than $8 a bushel on fears that up to 5m acres of the crop could be lost, while soyabean prices hit a record of $15.93 a bushel.

I spoke yesterday with Bob Burgdorfer at Reuters:

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.

This week's weather news sent me back to last month's Farm Bill coverage, to remind myself whether the controversial "permanent disaster assistance provision" had made it into the final law. It appears to me it did, but I am not sure I understand the provision correctly. Perhaps its main impact is not so much to increase authorized eligibility or benefit amounts for disaster payments, but rather to establish a permanent funding source out of customs receipts, making supplemental appropriations less necessary? It is not clear to me whether it will have an impact already this year. Here is the Congressional Research Service's description (.pdf) of the crop insurance and disaster assistance provisions.