Floods increase the chances of inflation
My greatest concern is deflation. Hence the title of my blog “Credit Writedowns.” However, inflation is still a short-term threat to destabilizing the global economy. The recent floods in the heartland of America is not only tragic, but inflationary due to crop losses. Bloomberg News has reported on its inflationary potential.
Corn climbed to a record near $8 a bushel as storms pounded crops in the U.S., the largest producer and exporter, and caused what may be the worst flooding in the Midwest since 1993.
Corn rose as much as 3.5 percent, and soybeans, wheat and rice all gained. The flooding in the Midwest will probably cause “hundreds of millions of dollars” of damage, according to the National Weather Service. U.S. corn stockpiles may fall 53 percent to a 13-year low before next year’s harvest, the U.S. Department of Agriculture said June 10.
–Bloomberg News, 16 Jun 2008
The picture should be clearer after the fall harvest is done.