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Midwest Floods Hit Fuels and Pork Sectors

by 5m Editor
18 June 2008, at 11:36am

US - The impact of the Midwest floods has spread beyond the Great Plains, affecting the ethanol industry, hog farmers, pork producers and even catfish farmers as the prices of grains continue to skyrocket.

Cities in Iowa, Wisconsin, Illinois and Missouri sandbagged levees to keep them from bursting and urged residents to seek higher ground. River levels in some places have surpassed records set during a flood in 1993, considered the worst in recent history, reports Hoosier Ag Today.

The entire state of Iowa is experiencing flood conditions, according to the Army Corps of Engineers. In Cedar Rapids, population 124,000, a railroad bridge collapsed, 3,000 homes were evacuated and a downtown hospital had to be evacuated. Experts say Iowa‘s Cedar River could crest above 30 feet -- more than 10 feet higher than its crest of 19.27 feet in 1993. Heavy rains are expected to continue across the Midwest at least through Monday, though drier, sunnier weather is forecast next week.

The flooding threatens to wipe out farms‘ crops of corn or soybeans, and this has pushed prices to record levels. On the Chicago Board of Trade Friday, corn prices hit a new record high of $7.3175 a bushel, while soybeans traded near record highs, closing at $15.60. Corn prices have climbed about 10% in the past week, threatening to put further upward pressure on food prices that have been climbing for a year.

Higher corn costs are cutting into profit margins of corn-fueled ethanol producers nationwide. At VeraSun Energy Corp., of Brookings, S.D., one of the nation‘s biggest ethanol producers, shares have fallen by about 14% in the past week and were at $4.81 in 4 p.m. New York Stock Exchange composite trading Friday. Shares of Denver-based BioFuel Energy Corp. are down more than 30% in the past week and were at $3.12 in 4 p.m. trading on the Nasdaq Stock Market.

The Iowa Renewable Fuels Association said Friday the flood has caused 300 million gallons of ethanol production, on an annual basis, to be forced off line and that could quickly grow to 400 million gallons.

Expectations for tighter ethanol supplies because of higher corn prices could increase demand for gasoline, in turn helping to force up gas prices. The squeeze on ethanol also could heighten calls for the federal government to suspend its requirement that nine billion gallons of biofuels be blended into gasoline by the end of this year.

View the Hoosier Ag Today story by clicking here.

5m Editor