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Dismal forecast: The weather as an economic indicator

Corn grows on a farm near Fredericksburg, Iowa.

Get ready for a bump in food prices. Analysts say that consumers could see an increase to their grocery bill based on the latest forecast for farmers this growing season.


Jeremy Hobson: Juli Niemann of Smith Moore and Company in St. Louis says she is worried about the weather. Juli, what's going on?

Juli Niemann: Well Jeremy, it's gorgeous here. It's dry, no humidity, not a cloud in the sky. I think there's a song in this. But crops are getting cooked in the field. The big problem right now is there's no rain. And the pain ahead is that the corn silking and the flower setting is shaping up to be probably the worst in years.

One climatologist we heard from has said the planetary alignment is now what it was in the 1930s and that distorts the gravitational pull on the weather patterns, setting us up for huge global drought.

Hobson: Bring us back to economics then. What does that mean for people as they go out and buy food and that sort of thing?

Niemann: Well, we now have over 7 billion people in the world and they're all hungry, and there's big demand out there for our grain. Russian drought killed the winter wheat crop. South American drought killed sugar, soybeans and corn, which means prices are really going up.

We were the last resort here. We have unseasonably warm dry weather. Very early spring. Killer late frost. All of this is setting up for significantly higher grain and food costs. Of course that passes through to the consumer.

Hobson: Well, of course the consumer is also having a little break when it comes to gas prices right now, right?

Niemann: Yeah but that goes into the gas tank and not into the grocery cart, and that's the big problem. We're getting a break from gasoline, which does help somewhat, but farmers are still paying higher fuel costs than they did last year so that's hurting them as well. So while we're getting a little bit of a break there we're going to see significantly higher food prices unless we get rain. And that directly hits all American consumers just at the time when you're trying to recover from a depression.

Hobson: Julie Niemann, analyst with Smith Moore and Company, thanks as always.

Niemann: You bet.

About the author

Juli Niemann is executive vice-president for research and portfolio management with Smith, Moore and Company.

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